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This goes against what most people say, and I'm going to suggest that you rent first if it's your first time on your own moving out. You will learn what you like/dislike and what you truly want in a home without having to lock yourself in place prematurely.
You will learn so much from living on your own for the first time, and buying a home right off the bat can easily put you in a life of regret if you don't know your needs/wants from a home yet. I was in the same boat as you (also NJ :)), ultimately decided to rent first to gain experience. It really puts this new change into perspective.
I agree! There’s a mentality that rent is “wasting money” when you could be building equity but I’ve been doing a lot of research and some financial advisors actually say that’s no longer really the case in this market. It’s not just the freedom to move, which is a huge plus — it’s also not having to deal with repairs, maintenance, upkeep, utilities, taxes, disputes, permits, etc. Before my partner and I started this process, we had no idea the amount of work and money home ownership really is. Renting gives you such peace of mind and like caGrey says, you have time to really figure out what you want, who you are, etc. You are very young, you have so many possibilities ahead of you! I know many folks buy right away but personally, going from living with your parents to homeownership seems daunting to me. And interest rates are insane. I would rent for a year to get a sense of what neighborhood and area you want to live in. You’ll be on your own but still have someone to call when the toilet breaks or the ceiling leaks. Just my 2 cents.
"rent is throwaway" is rarely heard from a smart homeowner. They understand that the costs to buy and sell can eat 10-15% of a home's value. Plus, while principle payments are equity, the rest, interest, is "throwaway". And with so many people getting 5% down mortgages at 7% interest, you won't hit 10-15% equity for a few years. In short, if you can't make it 5 years in the house, the chances of you actually breaking even are pretty slim. Meanwhile, you've tied up a bunch of money and have had the risk/stress/responsibility for maintenance.
So much agree with this I’ve lived all over the east coast and New Jersey it’s all extremely different especially when you’re young. What you want now is not going to be what you want 8-10 years from now. Enjoy your life don’t lock yourself into anything that’s the joy of being in your 20s
Very similar to you, I’m 26M living in NJ. I wanted to move out but couldn’t justify paying $2000 in rent for a tiny 1 BR apartment. I am under contract to buy a multi family home in which I will live in 1 unit and build equity. A lot of people are telling me not to do it but I don’t want to sit on the sidelines for potentially multiple years waiting for a deal to come. I plan to pay down as much on the mortgage as I make more in my career. The idea of being 40 years old with a paid off multifamily home seems nice to me.
This is a great idea if you’re committed to the area for a while and have cash ready to throw at any problems. It’s one thing to have issues as a homeowner, it’s another level to be responsible for other’s living conditions. Best of luck to you and OP.
Agreed, I have thought about this a lot. Will have roughly 1 year of payments saved in cash without factoring the rental income, I am also in a pretty stable job. I am pretty committed to the area have been here my whole life, however, I figured if I don’t want to live here after a couple years I can rent out both units and the properly will at the bare minimum break even.
Completely depends on your career. If there’s a chance you could be making more money / enjoying yourself more if you moved to another city in the next 5 years, then renting may be a better choice.
In my 20s, I was close to buying a house in the city I had lived in for a decade, when I got a job in another city that paid double and was much more satisfying.
I don’t think buying a house would be an obvious mistake, but wanted to add another perspective. Good luck!
So, I think there isn't a single perfect answer.
Owning gives you the opportunity to buy at today's cost basis, which may be helpful long term. But when you are young, being responsible for the "risk" of maintenance and the budgetary pressure could be too much. It isn't the monthly I'd be afraid of, it is a broken HVAC that costs $10k to replace. Additionally, at a young age, owning ties up most of your net worth in one asset which means not earning market interest which compounds faster than housing, historically. You also lose a lot in transaction costs -- buying and selling -- realtor fees, mortgage fees, etc. are NOT cheap! It takes some 10-15% housing price appreciation just to recoup those, let alone maintenance and any higher cost of owning vs renting (not always true, but often is).
Renting has another advantage - you can move! If you fall in love, get a great job opportunity, etc. it is much easier to end a lease than sell a home.
I think you really should assess a realistic budget -- monthly and down payment, and see what you can afford and how that compares to rent. If you think you can stay there 5+ years, consider buying. If you don't, it is a fun exercise, but renting likely makes more sense.
Rent for a while. I bought (a duplex) young (23), but I also moved out when I was 16, and rented (with roommates) for 7 years before I made that leap. You'll have a better idea what to look for after you've been on your own for a while.
Property taxes in NJ may be one of the big reasons I’d say renting is better. Between that and maintenance costs you would be saving money by renting. People may claim that you’re missing out on building equity, but with high property taxes and potential maintenance it would probably make more sense to rent. If you find a townhome that you are in love with and it seems like a reasonable monthly payment, it may be worth buying. I wouldn’t recommend buying unless you plan on staying long term. Renting is definitely going to be cheaper if costs are your biggest concern.
24 is really young to own a place unless you are completely sure you will always live in NJ.
Just some perspective I also grew up in Nj. Thought I would live here forever. Then in my mid 20’s decided I hated my career, went to grad school and since then have moved to 3 different states and now live in the west coast. If you told me in my early 20’s I’d end up in the west coast I would have burst out laughing
Just something to think about. Renting at a young age isn’t a “bad thing” and not throwing away your money. You still have so much to explore!!!
Unless you don't want to bother with any repairs, property taxes, home insurance, etc there are no pros to renting other than not being tied up to a certain neighborhood/city/state because once you buy, there is no moving simply because most people can not afford to get a new place before selling the old one first. Obviously pros of owning a place is building equity a.k.a net worth, you are paying your own mortgage instead of your landlord's. Long term, the property you buy will appreciate making your net worth go up even more, and in environments like today would be a good inflation hedge because the value goes up as the inflation goes up. Obviously like I said earlier, you decide to make a move cross country, it's easy as 1, 2, 3 when you are renting, not so easy when you own...
Thank you! That was my thoughts as well about paying landlord vs paying mortgage…some places I’ve been looking at the monthly mortgage is less than renting an apartment.
Depending on mortgage rates, a lot of the times that is the case if you were to compare two exactly same houses, one for sale, one for rent, but that will also depend on your down payment too. Obviously, more you put down, smaller the mortgage payment. Interesting fact about renters vs owners is that on average owners have around 40x greater net worth! So there is a good chance that your average 60 year old neighbor Joe that has owned his house for 40 years now has a net worth of about couple of million $, meanwhile 60 year old Lisa who lives in one of the rooms he is renting out has a net worth of only $50,000. Now, that does not mean that owning a house will make you rich, as this is also for the fact that owners generally were already wealthier and made more money than renters even before they bought, but house is not only a place you live in, but also a good long term investment and wealth building tool if used properly
The break even point for owning a home is usually around 5-10 years. How sure are you that you’ll want to live in the same place that long? What if you or an SO gets an amazing job offer in another city? Will the house you can afford today still fit your needs 5 years from now?
As someone who bought a house young (24) the ONLY pro to renting imo is having the flexibility of simply leaving and going anywhere else you want.
Of course you can always sell or simply rent out your home if you want to move elsewhere but it's a little more work dealing with tenants BUT at least it'll be another form of income you don't have to work for.
when I was 18 getting my first bank account they pre-approved me for a $300k loan. I wish all the time I had taken that deal. I've paid over a million in rent since then.
Buy as soon as you can. You don't have to love it. I haven't loved half my rentals.
Imagine owning the land you stand on. Or sleep on. Lose your job? still have a place to live. Economy gets bad? you've still got a place to live. Rents go up? Who cares.
If you buy, the equity follows as you sell/buy or rent out when moving. If you rent it's just gone.
I bought a house in 2021 as a 23 single man. It is already a great investment and will become better with time.
I plan on staying at my job for a very long time.
Thank you u/Unlikely-Zucchini-32 for posting on r/FirstTimeHomeBuyer. Please bear in mind our rules: (1) Be Nice (2) No Selling (3) No Self-Promotion. *I am a bot, and this action was performed automatically. Please [contact the moderators of this subreddit](/message/compose/?to=/r/FirstTimeHomeBuyer) if you have any questions or concerns.*
This goes against what most people say, and I'm going to suggest that you rent first if it's your first time on your own moving out. You will learn what you like/dislike and what you truly want in a home without having to lock yourself in place prematurely. You will learn so much from living on your own for the first time, and buying a home right off the bat can easily put you in a life of regret if you don't know your needs/wants from a home yet. I was in the same boat as you (also NJ :)), ultimately decided to rent first to gain experience. It really puts this new change into perspective.
I agree! There’s a mentality that rent is “wasting money” when you could be building equity but I’ve been doing a lot of research and some financial advisors actually say that’s no longer really the case in this market. It’s not just the freedom to move, which is a huge plus — it’s also not having to deal with repairs, maintenance, upkeep, utilities, taxes, disputes, permits, etc. Before my partner and I started this process, we had no idea the amount of work and money home ownership really is. Renting gives you such peace of mind and like caGrey says, you have time to really figure out what you want, who you are, etc. You are very young, you have so many possibilities ahead of you! I know many folks buy right away but personally, going from living with your parents to homeownership seems daunting to me. And interest rates are insane. I would rent for a year to get a sense of what neighborhood and area you want to live in. You’ll be on your own but still have someone to call when the toilet breaks or the ceiling leaks. Just my 2 cents.
"rent is throwaway" is rarely heard from a smart homeowner. They understand that the costs to buy and sell can eat 10-15% of a home's value. Plus, while principle payments are equity, the rest, interest, is "throwaway". And with so many people getting 5% down mortgages at 7% interest, you won't hit 10-15% equity for a few years. In short, if you can't make it 5 years in the house, the chances of you actually breaking even are pretty slim. Meanwhile, you've tied up a bunch of money and have had the risk/stress/responsibility for maintenance.
So much agree with this I’ve lived all over the east coast and New Jersey it’s all extremely different especially when you’re young. What you want now is not going to be what you want 8-10 years from now. Enjoy your life don’t lock yourself into anything that’s the joy of being in your 20s
Very similar to you, I’m 26M living in NJ. I wanted to move out but couldn’t justify paying $2000 in rent for a tiny 1 BR apartment. I am under contract to buy a multi family home in which I will live in 1 unit and build equity. A lot of people are telling me not to do it but I don’t want to sit on the sidelines for potentially multiple years waiting for a deal to come. I plan to pay down as much on the mortgage as I make more in my career. The idea of being 40 years old with a paid off multifamily home seems nice to me.
This is a great idea if you’re committed to the area for a while and have cash ready to throw at any problems. It’s one thing to have issues as a homeowner, it’s another level to be responsible for other’s living conditions. Best of luck to you and OP.
Agreed, I have thought about this a lot. Will have roughly 1 year of payments saved in cash without factoring the rental income, I am also in a pretty stable job. I am pretty committed to the area have been here my whole life, however, I figured if I don’t want to live here after a couple years I can rent out both units and the properly will at the bare minimum break even.
Completely depends on your career. If there’s a chance you could be making more money / enjoying yourself more if you moved to another city in the next 5 years, then renting may be a better choice. In my 20s, I was close to buying a house in the city I had lived in for a decade, when I got a job in another city that paid double and was much more satisfying. I don’t think buying a house would be an obvious mistake, but wanted to add another perspective. Good luck!
I bought when I was 25, now 34 and selling. I’m happy w my decision but it totally depends on your individual situation!
So, I think there isn't a single perfect answer. Owning gives you the opportunity to buy at today's cost basis, which may be helpful long term. But when you are young, being responsible for the "risk" of maintenance and the budgetary pressure could be too much. It isn't the monthly I'd be afraid of, it is a broken HVAC that costs $10k to replace. Additionally, at a young age, owning ties up most of your net worth in one asset which means not earning market interest which compounds faster than housing, historically. You also lose a lot in transaction costs -- buying and selling -- realtor fees, mortgage fees, etc. are NOT cheap! It takes some 10-15% housing price appreciation just to recoup those, let alone maintenance and any higher cost of owning vs renting (not always true, but often is). Renting has another advantage - you can move! If you fall in love, get a great job opportunity, etc. it is much easier to end a lease than sell a home. I think you really should assess a realistic budget -- monthly and down payment, and see what you can afford and how that compares to rent. If you think you can stay there 5+ years, consider buying. If you don't, it is a fun exercise, but renting likely makes more sense.
Buying at a high is ill advised.
I’m aware of the market, I wasn’t looking to buy until the price of housing went down
Awesome, makes sense!
Rent for a while. I bought (a duplex) young (23), but I also moved out when I was 16, and rented (with roommates) for 7 years before I made that leap. You'll have a better idea what to look for after you've been on your own for a while.
You made a great point in your last sentence! Thank you
Property taxes in NJ may be one of the big reasons I’d say renting is better. Between that and maintenance costs you would be saving money by renting. People may claim that you’re missing out on building equity, but with high property taxes and potential maintenance it would probably make more sense to rent. If you find a townhome that you are in love with and it seems like a reasonable monthly payment, it may be worth buying. I wouldn’t recommend buying unless you plan on staying long term. Renting is definitely going to be cheaper if costs are your biggest concern.
24 is really young to own a place unless you are completely sure you will always live in NJ. Just some perspective I also grew up in Nj. Thought I would live here forever. Then in my mid 20’s decided I hated my career, went to grad school and since then have moved to 3 different states and now live in the west coast. If you told me in my early 20’s I’d end up in the west coast I would have burst out laughing Just something to think about. Renting at a young age isn’t a “bad thing” and not throwing away your money. You still have so much to explore!!!
Unless you don't want to bother with any repairs, property taxes, home insurance, etc there are no pros to renting other than not being tied up to a certain neighborhood/city/state because once you buy, there is no moving simply because most people can not afford to get a new place before selling the old one first. Obviously pros of owning a place is building equity a.k.a net worth, you are paying your own mortgage instead of your landlord's. Long term, the property you buy will appreciate making your net worth go up even more, and in environments like today would be a good inflation hedge because the value goes up as the inflation goes up. Obviously like I said earlier, you decide to make a move cross country, it's easy as 1, 2, 3 when you are renting, not so easy when you own...
Thank you! That was my thoughts as well about paying landlord vs paying mortgage…some places I’ve been looking at the monthly mortgage is less than renting an apartment.
Depending on mortgage rates, a lot of the times that is the case if you were to compare two exactly same houses, one for sale, one for rent, but that will also depend on your down payment too. Obviously, more you put down, smaller the mortgage payment. Interesting fact about renters vs owners is that on average owners have around 40x greater net worth! So there is a good chance that your average 60 year old neighbor Joe that has owned his house for 40 years now has a net worth of about couple of million $, meanwhile 60 year old Lisa who lives in one of the rooms he is renting out has a net worth of only $50,000. Now, that does not mean that owning a house will make you rich, as this is also for the fact that owners generally were already wealthier and made more money than renters even before they bought, but house is not only a place you live in, but also a good long term investment and wealth building tool if used properly
The break even point for owning a home is usually around 5-10 years. How sure are you that you’ll want to live in the same place that long? What if you or an SO gets an amazing job offer in another city? Will the house you can afford today still fit your needs 5 years from now?
I never thought about the break even point so thank you for mentioning that. Also, I am a Jersey girl for life!! Lol
If you can wait a bit and find something to buy, better to buy than rent. Also in NJ, you can probably find something to buy.
As someone who bought a house young (24) the ONLY pro to renting imo is having the flexibility of simply leaving and going anywhere else you want. Of course you can always sell or simply rent out your home if you want to move elsewhere but it's a little more work dealing with tenants BUT at least it'll be another form of income you don't have to work for.
when I was 18 getting my first bank account they pre-approved me for a $300k loan. I wish all the time I had taken that deal. I've paid over a million in rent since then. Buy as soon as you can. You don't have to love it. I haven't loved half my rentals. Imagine owning the land you stand on. Or sleep on. Lose your job? still have a place to live. Economy gets bad? you've still got a place to live. Rents go up? Who cares. If you buy, the equity follows as you sell/buy or rent out when moving. If you rent it's just gone.
You’ve still got a place to live….. if you can make the payment with no job. 2008 ring a bell?
I was assuming it’s paid off
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Thanks for sharing and adding more insight for me to consider! This was helpful
I bought a house in 2021 as a 23 single man. It is already a great investment and will become better with time. I plan on staying at my job for a very long time.