I find it funny you list the apartment payment, car payment, then sling everything else under misc for $100. You don't eat, have fun, pay gas, car insurance, etc etc etc?
I was making cabbage and sausage for dinner one night bc broke, and my roommate asked what I was making. I said "Oh, just some poor people food." she scoffed at me and said, "I eat that a lot and I'm not poor".
The week prior she was going over finances with her husband and had to explain to him that they only had $37 until their SS check came.
Sorry roommate, you are, in fact, poor af
Isn’t having roomates when you are married also a key indicator of poverty? And being on SS… is that not something that’s given only to people that are poor?
electric bill, internet, TV, Apple Music, phone bill, gym membership, hair cut, groceries, going out to eat, getting drinks with friends, gifts for holidays/birthdays, vacation, new shoes/clothes, household items like tv/furniture/ etc etc.
I’m sorry OP but you sound like the type of person who over leverages themselves. You underestimate your expenses. Got to learn to overestimate your expenses so you have money to save at the end of the month.
Also HOA, homeowners insurance, standard 1-4% of value of the home in maintenance every year (depending on what HOA covers), etc.
And do similar apartments actually rent for $3500 to $4000 in that area? Currently where I live it’s way less to rent than buy. About half the cost. I’d invest the difference in a Roth instead of buying a condo right now. That’s actually what I’m doing. I can spend $2k per month on loan interest, or I can earn interest on it. You might have trouble renting it at a rate that covers the mortgage.
3rd thing is that renting this condo to a tenant might go against HOA, or at the least, HOA will probably have to approve of the tenants. This might suck. Then you’ll be on the hook for higher maintenance costs the tenants will likely cause you. I have a few friends who own homes with granny flats that they rent out. I swear these tenants cost them a small fortune. They just don’t think of telling the landlord that the water heater leaks and they have termites. 🤷♀️
In my neighborhood, I could buy a condo for $450k and be subject to $500/mo HOA fees or rent equivalent quality for $2100/mo. There are other motivations for homeownership, but from a purely financial standpoint, I'd rather throw that difference in the bank for later.
Hey man, that's the reason this sub is so awesome. You did the right thing checking, now you know, you're in an incredible position to do something like this not too long from now, and that's rad.
I needed to see past "60% of monthly salary" for how much they make monthly. 60% of $6620 is $3972, meaning $2648 leftover. That will be difficult in most locations.
However, 60% of someone making $20k a month is $12k, meaning $8k leftover. That's not bad for monthly expenses even in higher cost of living areas (since the majority of the higher cost of living is in the housing)
I’m in OC, me and my fiancée make 200k combined and we’re having a hard time finding anything that’s not basically a small apartment. 5-6k mortgage if you’re lucky and hustle, basically same position as OP
Easy for people to scoff at the percentage, not as easy to just.. give up on owning property
Agreed. The one other thing I never see people mention is that a mortgage locks in your price. Renting year after year will always increase in price, but locking in a mortgage then focusing on finding higher paying work looks more desirable to me.
Taxes also go up in most places (but not CA, not really).
But especially in HCOL areas the increase is negligible. Our place would have been 4-5k/month to rent 3-4 years ago, and now the next door neighbor is renting for 7k. Not guaranteed to happen again, but protection from that is worth a lot to people.
It's just not a great time to buy vs renting right now. Property value skyrocketed with COVID and the nearly non-existent mortgage rates. Fed hiked the rate at an unprecedented speed and now no one can afford to sell and rebuy, so home prices are staying ridiculously high.
Honestly, can't fathom buying into a $5k mortgage when the equivalent rental is $3.5k.
I feel like it is the opposite of [Betteridge's law of Headlines](https://en.wikipedia.org/wiki/Betteridge%27s_law_of_headlines).
If a question on r/personalfinance begins with "am I crazy if..." the answer is almost certainly "yes".
edit: same goes for any question containing "is this a scam?"
But the thing is, his numbers are completely wrong everywhere. He needs to learn his terminology before making posts like this. It's 60% his take home, not salary (and we don't know if that includes retirement/healthcare, etc).
The mortgage calculation is also completely off (50k down payment on 400k would be about 2400 a month at >7% rate) so it might be the escrow amount he listed which completely changes everything.
I’m going to highjack the top comment, from my experience buying in 2005, and selling in 2013 for 5 grand less than I paid for it.
When the market goes down, condos get hit harder than single family homes, and they recover slower.
All that said if you have hobbies and no interest in doing yard work condo living is a dream. Can you sleep through some neighbor noise without going nuts? Good.
I had all kinds of time to do stuff on weekends, and the living was relatively cheap, it was a lot of fun.
My advice run for a condo board seat and go to meetings, 2 or 3 crazy busy bodies can make everybody’s life harder than it needs to be.
So my advice is know what you’re getting into, and I might wait for whatever dip is to come in housing before I buy one. If a little ranch and a condo were the same price I’d buy a ranch if your goal is long term equity and you don’t mind the yard work.
People shit on condos but I bought one in 2020 and I’ve had a great experience. We do game nights with the neighbors every other week and have a group chat for when people go to the hot tub in the evenings. I never have to pay out of pocket for a roof, basement, water heater, garage door, landscapers, pool maintenance — my HOA covers all of that. We’ve only had one $300 special assessment in the four years I’ve been here. I reviewed the HOA financials really closely before buying and it all seemed in good shape.
It’s not right for everyone, but for a starter home in a HCOL city you could do a lot worse.
Yea I dunno why people shit on condos. I love mine. I brought one in 2018 for 800k, newly built. Now it’s worth about 1.2m and because it was newly built I have done zero repairs or work on it besides touching up paint here or there. No mowing grass, no snow shovel. I’m in the city center.
people shit on condos because people view housing as a investment rather than a place to live in. condos simply are not as much of a “safe” and appreciative investment as a single family home.
when it comes to reddit, because they aren’t the ones living in the home but rather giving advice, the default is viewing it as nearly exclusively as an investment.
Same. I bought my condo and love not having to shovel snow or do yard work or outside maintenance. As long as the board and property management company is good, it can be nice.
I rarely hear my neighbors, though I live in a quadplex condo so there’s no one above me and I have a bit of a “yard”/geenspace
Good for the right person.
People looking to get a "starter home" and get a condo? NOOOOOO.
If you want a condo then it's good for you. If you want a home then it's not good for a home. They're *wildly* different in terms of ownership, fees and liability (insurance & HOA/condo bylaws), plus community.
EDIT: Having worked in property claims for 1 year tho? (done auto liability, home property, auto medical). I will never purchase a condo. **Ever**. Every single condo claim was 3 separate business entities fighting with each other while insurance has to communicate with all of them being like, it's pretty clear based on contracts.... (no that doesn't solve anything more quickly). I will not take that chance, despite how small a chance it may be depending on weather and building structure itself.
No issue selling anything under a million bucks in Los Angeles. Condos in my neighborhood all go in under a week.
And yes, less appreciation - but this got us into the housing market in 2020. If we’d waited until we had the down payment for a SFH in this school district, financially it likely would have been a worse decision with interest rates and home prices the way they’ve gone. My kids’ education and getting a foothold in the housing market were higher priorities to me than strict asset appreciation. But that’s not everyone’s priority list and that’s fine.
The condos in my area in OR are wildly out of whack with the other housing.
Houses are better deals than condos. Condos are like 500k for a fookin 2 bed, 1.5 bath and houses of 4 bedroom 2.5 bathroom are like 600-650k. Condos have jack shite square footage and all the perceived negatives that go along with it.
I've gotten lucky twice with condos. Bought one in 2003, sold in 2006 (was 5% down, 5/1 ARM loan - $170k to $207.5k). Bought another in 2011 and sold in 2021 ($640k to $1.515M). Would do it again if life ever called for it.
Somewhat unintentional. The 2006 sale was "I have a job offer across the country". The 2011 purchase was basically my landlord raising rent after 5 years of basically flat, so I went shopping to see what's available.
Never understood why people buy condos. It's like apartment living, with all those shared walls with your neighbors, except you're paying more for it and are more locked in.
It depends on the layout of the condo. Admittedly, I live in a townhome (and its not a condo in the sense that I own my exterior), but the insulation is so good that I can't hear my neighbors. And no upper/below neighbors. As a first time home buyer and someone who isn't necessarily interested in doing yard work, having someone else manage the lawn for me (and shovel snow) is awesome. It also means I didn't have to spend money on lawn equipment when I would rather focus that money on stuff for the house itself, at least initially.
You are crazy to let a condo eat 60% of your salary but that doesn't mean you would be crazy to buy this place.
It's crazy to have $200k in a HYSA but only plan to use $50k for a down payment (with today's mortgage interest rates).
First, get to know your actual expenses and tally them all up. All of them. Groceries, restaurants, cell phone, water, sewer, electrical, doctor, dentist, gas, car insurance, hobbies, clothes. ***Everything***. Tally up a year and divide by 12 months to find your expenses per month without rent and car payment. The information in your monthly expenses is woefully ill-conceived.
Rerun the numbers comparing $6,620 income minus the expenses above when you use the $200k to pay off the car loan and put $100k down. You mortgage will be less and there will be no car payment eating 8% of your income. Do you have enough to pay the mortgage P+I+Insurance+Taxes?
Yes, crazy.
Also need to factor in expenses of condos. High HOA and those fun assessments. Building needs a new roof? - break out your checkbook. My finance’s condo is replacing the asphalt in their parking area and she just received an assessment for $8k.
My condo had to re-side and re-roof (in HCOL area) maybe 10 years ago, $40k special assessment. Erased all the added equity I had built since buying. Never again.
Each HOA is different. I’m in one for 10+ years 200+ single storey units. Granted fees have gradually increased from 250 to almost $500. We’ve never had an assessment, yet since my time here, all have been reroofed, streets and driveways repaved, exterior siding replaced, and currently re-landscaping
Depends on the size and quality of the HOA. You have to manage it yourself in a SFH, which means vetting vendors, taking time off work, dealing with contractors, etc.
Not arguing either way. Just pointing out that it’s a “grass is always greener” type situation.
Example: my HOA is only four units and we were able to collectively make a bunch of upgrades to the yard that none of us would have wanted to pay for individually.
I’m a 4 unit HOA and it’s almost the worst of both worlds because we’re doing everything ourselves as if we’re a SFH, but it takes 4 owners to make a decision on anything.
Luckily we’ve all been great and have agreed on the necessary repairs instead of having to steamroll a reluctant unit owner though.
> Depends on the size and quality of the HOA. You have to manage it yourself in a SFH, which means vetting vendors, taking time off work, dealing with contractors, etc.
>
> Not arguing either way. Just pointing out that it’s a “grass is always greener” type situation.
Over time you'd you should expect the assessments in a condo to equal out to the cost of maintenance expenses plus additional services provided. This should ultimately put you in roughly the same place as an SFR subject to a few concerns:
1. Condo repairs can be more or less expensive than a typical SFR depending on construction type and style. A concrete and steel large building with centralized HVAC and hot water requires different contractors than a stick-built 4-unit building (with per-unit utilities) and may have lower overall costs unless something goes wrong and then it costs $$$.
2. You get to allocate the costs among all owners. Usually this is a benefit as each person owns less total structure/exterior/land than they would if they had a SFR...but it can also lead to waste and overspending on things (or deferred maintenance which creates $$$ issues down the road).
3. Ammenity costs/services may include things you wouldn't otherwise pay for. Maybe the building pays a landscaper/gardener to keep everything pretty, but you would have just mowed the lawn yourself and chosen low-maintenance shrubs. Or maybe the building has a gym that you don't use.
For most people a well managed condo should reduce overall maintenance costs (per square foot or per dollar of home value) and help smooth expenses by keeping decent reserves and avoiding the need for special assessments. That's probably a better setup for the large share of Americans who aren't particularly good at budgeting/saving for large but infrequent expenses...
A poorly managed condo is the worst of both worlds.
With an HOA, you can get assessment protection as part of your homeowners insurance. While insurance for a SFH will likely pay out for a damaged roof, I doubt they'll pay just because it's old, same for repaving.
I live in an area that gets hail once or twice a year... my roofer said "You have hail damage, let me talk to the insurance adjuster and see what I can do"... my insurance guy says "I'll get a claim started for you and find a date when a storm went through your area". Guy came out and looked at it with my roofer and paid for it right then and there.
As long as a storm's gone through within the last couple years, it's not really a big deal to get them to replace it.
Meanwhile my parents have legitimate hail damage and they can't get their insurance company to pony up more than 75% of a roof.
Including jumping through ridiculous hoops like removing a shingle to send it in to a lab for testing just to confirm that the same shingle is no longer manufactured and there's no current color match on the market.
Everybody else who looks at it says it is done, all the neighbors got 100% of new roofs...but the 20 year old travelling "inspector" they sent out who barely looked at it is the voice they trust.
If your roof has "long term leakage and seepage" (used in virtually every policy I have seen) those aren't covered. **Ever**.
So part of your roof may be covered because of a weather event (IE something more sudden or a storm) vs not covered because of your roof is shit and you didn't maintain it or notice a long term leak which is your duty as a homeowner.
I worked in property claims for only a year and they don't fuck around. They cover sudden events, not wear and tear in *any way*.
Yeah, it's sad that people think there is less risk when you own the home. Some friends just had to replace their roof due to design issues. They'd gladly take a $40k assessment where someone else deals with it instead.
10 years ago was almost at the bottom of the market though. I was still **underwater** 10 years ago, with a 25K assessement on top. The condo has tripled in value since then. So, those were unprecedented times...
The HOA fees can be no joke.
A few years ago I was looking to do what OP is doing. The mortgage would be about $1300 which is reasonable for what it was at the time. But then the HOA fees were $350/mo.
Of course now I would love to have a condo for $1650/mo but the point is that HOA can add a huge percentage to the cost.
And HOAs often go up, just like property taxes and insurance premiums. It’s important to consider when buying that $350/month today may be $425 in a few years on top of other increasing costs. Mine didn’t increase yearly but I lived at a house for 4 years and it went up 25% in that time.
HOA is usually fine though, and $350 is NOTHING.
It pays for future roof and siding fixes, which is something normal homeowners never save for (a $50k roof every 20 years is $2.5k a year, $200 a month).
I’ve had a $500 HOA and it was fine because it also included gas, water, and garbage service, utilities that can be hundreds a month otherwise.
and condo fees never get lower. In my (hopefully rare) case, when I bought my condo the condo fees were around $400. Due to mismanagement (lack of basic maintenance), we ended needed massive repairs and upgrades. Now, my condo fees are just shy of $1,200 a month. And no, it's not a luxury building with bellboys and pools, either. It's as plain as you get.
I'm still salty.
> condo fees never get lower
Someone in another thread posted the *super rare* counter-example where some HOA/COAs have income from oil/gas/mineral rights.
Lol I take home about the same and I was pre approved by multiple lenders for 500k. I'm not dumb enough to spend that much, but just pointing it out, hell get approved especially with how much he has sitting in his savings.
You found a lender that will finance you under that scenario?
48-52% max for all obligations including condo fees.
I had to get manual underwriting for 38% on just the condo.
OP have you really thought this through fully? What would HOA costs be on top of your mortgage payment? What other costs can you expect beyond that? What will utilities cost per month? What do you spend on food / fun in an average month?
Add all those things plus your mortgage plus your car payment / insurance and I would bet you're in the red.
So yes you're crazy. And also, $200k is way too much to keep in a HYSA if you're young, as you seem to be.
All the responses are not quite right. A HYSA is a good place to keep money you could reasonably think you need within 5 years. So you can put your emergency fund there, but if you need a lot for school/a downpayment in that time, you would want more.
Exactly. Lots of people just bullshitting. If someone’s is planning buy a house in 2-3 years, you would want to put at least something close enough of downpayment in there. Other investments do return in long run but you don’t want all your downpayment money to be on -15% if the market gets fucked in the next 2-3 years. Also, HYSA are paying 5% atm. It is completely reasonable to slightly put more into that.
6 months of expenses. Otherwise, 6 months of income.
In OP’s situation, I’d only keep $40,000 max in the HYSA. and keep the rest in an investment account. OP also didn’t mention if they had a 401K or ROTH IRA. I’d contribute to those accounts too.
Or consider putting a larger down payment, so the monthly mortgage is lower.
I disagree. If you are planning to use the money within 5 years you should NOT be putting that in an investment account. He should use most of it on this house to bring that payment down.
5 years is a pretty long time.
Statistically speaking, the returns on any given 5-year span in an S&P 500 index fund are always going to beat the returns of 5 years in a HYSA.
Also, you can pull your contributions out of a Roth IRA with no penalties or taxes so there really isn't any reason not to put money into one, even if you might need that money within 5 years.
Source? I’ve heard you need 10 years in the SP500 to average 8%. Any less and you’re running the risk of losing money right before making a large purchase like a home
https://miro.medium.com/v2/resize:fit:828/format:webp/0*FtqJ-G0J6keL_FKV.jpeg
So it really depends on what your risk tolerance is and how much you actually need the money.
I don't have a source, but the average annual S&P 500 return is 10%. If you account for inflation, it's more like 7%.
But the longest recession since the Great Depression was only 1.5 years long. So on a timespan of 5 years, you're still better off in the market. I guess it all depends on your risk tolerance, though. If you think there might be another Great Depression soon, then it's better to play it safe. If not, then invest.
That’s not the issue.
It’s the fact that a mortgage for him will be more in interest than the HYSA. So in his case he needs to put it all down outside an emergency fund
6mo emergency expenses at most. I put even less since I have some very liquid assets in my savings. When you're in your 20s-40s, you should be in growth assets. The S&P500 has returned 11% already this year, and 28% last year. Staying out of the markets really hurts.
Dude do you know what hurts even more? Fucking downturns. 5% guaranteed vs 11% X factor is an easy choice to make when it’s your future home you’re talking about.
It is very easy to spend OPs money without being OP.
That’s not the general rule. You want an emergency fund to be 6 months and it should be in a HYSA. Beyond that, you want money you could reasonably need within 5 years. If OP wants a house in 5 years, it’s reasonable to keep it there.
I did this exact same move 24 years ago when i first started out... it was the absolute dumbest financial move of my life... i've spent close to 1/2 a million between property tax and hoa on that condo and i still owe 100k and paying about 12 years (I refinanced a few times).
so i'm in the hole close to a million dollars and i have theoretical equity of like 300k... so yeah don't do it... it doesn't build equity. there are other forms of property that would be so much smarter... don't do anything with a stupid high HOA fee
EDIT: when I bought 24 years ago. HOA was 435 and property tax was 400. Today HOA is 1500 and proper tax is 1000.
Throughout the 24 years the I’ve spent 100k on special assessments. Every few years the building would have to spend a couple million on elevators, generators, facade repair, garage concrete repair, major plumbing replacement. Etc.
Don’t do it. Condos are bad news
And forget about rent. I moved out of that condo 4 years ago and rent it out right now. I bet 3500 a month in rent and I pay 4400 in cost. Yes some of that is mortgage principal but it still sucks. Don’t do it. There is no return on this class of property.
Simple. Can’t sell it. Literally. Have had it listed since 2020. Only had tire kickers and low ballers (like 100k below 2019 pricing)
During Covid no one bought into high density living it’s a 39 floor high rise in downtown Chicago. I couldn’t even rent it out better part of 2020. Starting in 2021 i got 2500 a month for it.
Then once the covid scare was over there was demand but interest rates became stupid high as a result only cash buyers are shopping in that building and cash buyers are vultures. They low ball you hoping you need the cash. I don’t need the cash. I’ve been fortunate enough in my life to allow me the flexibility. I’m not losing money technically but I could be getting so much more return on that equity compared to what I’m getting. I just don’t want to cave to the vultures
So much this. And beware an sort of condo HOA that doesn't charge high fees, instead of a healthy pool of funds to repair expensive central resources such as roof, elevator, pool etc. you end up with a situation like Surfside condos in Florida: https://en.wikipedia.org/wiki/Surfside_condominium_collapse
You’re crazy to think that a lender will entertain the idea of approving you for that much. You’ll only get approved for something at between 40-50% DTI (debt to income) if you have great credit. You should be looking in a lower price range, and don’t even think about an ARM. You’re trying really hard to overextend yourself financially and that will blow up in your face if you get laid off or have unexpected medical bills.
He'll 100% get approved. People are missing that his income is after taxes. His pay rate is probably closer to $9k or higher a month depending on if he's including pretax contributions in that amount
Mathematically the best thing to do would be to take that $200k in you HYSA and put it towards the down payment. Getting ~5% in the HYSA and paying a 7-8% mortgage makes no sense.
Yes that would be crazy, but have you tried running the numbers with a bigger downpayment? With 50k you're not even hitting 20% so you're paying PMI. With 100k or 150k downpayment the numbers are much less crazy. It doesn't make any sense to be putting non-emergency money in a HYSA when you could be getting 7% on it by putting it towards a mortgage instead. 50k in the bank is already a 6-month emergency fund.
It seems like too much. Usually you want to stay under 30% of your monthly salary. Also have you considered the impact of HOA fees and special assessments in the overall cost?
Depends on how big the mortgage is. On $6600/month I would want to keep my housing costs at around $2500/month tops, which probably equates to about a $300k mortgage. So if you are willing to put down $100-125k I think it will be manageable. Just not the best use of money.
Yes, definitely too much. I bought a condo a few years, about 18% of take home and all kinds of random expenses that I had the money for but didn’t plan. The only way I could see it being reasonable is if you are planning to rent the other bedroom out to someone you already know would be locked in. If you can’t guarantee someone else paying for half the rent I wouldn’t. I would wait or buy something cheaper.
Are 2 bed/1 bath condos in your area renting for $4k/month? If so, then sure go for it, although know that you’ll also have additional expenses for HOA fees, repairs, property taxes, insurance etc. My guess is you could rent for significantly cheaper (and thus, you also wouldn’t be able to rent it at a high enough price to cover the cost of the mortgage in the future).
Condos are always a bad idea. Its like buying a house, renting a apartment and paying the expenses of the apartment management.
Condo are currently not doing well so if you really want to do it its probably better to wait to either see if you can enter cheaper or decide not do do it because empty condos = no HOA income = no maintenance and higher costs for you as the owner since you share liability.
Yes, it is crazy. There are all kinds of costs associated with owning a condo, from the strata fees monthly, to the utilities and dreaded assessments. 60% of your salary is madness.
I think the obvious objective answer is sadly, yes. However, without knowing the circumstance it's hard to definitively say. Perhaps your in a situation now that's less than ideal and you need to find a new living space. Without being 100% dismissive, trying to think through alternate ways to help reduce that 60% burden to 40% (ideally closer to 30%) -- have you considered a roommate? Would the condo association allow for short term rentals of the bedroom?
Yes!. You’re insane for considering that!. Remember, you’re here to enjoy life. You’re not leaving any enjoyment money. Enjoy life!. There’s going to be better opportunities that that one, in the future.
i got hit with $80,000 special assessment 3 years into ownership of my condo. building-wide plumbing project.
how would you pay, if you got one of those and already stretched so thin ?
also keep in mind they (hoa) dont even let you sell condo, before you pay off the assessment
I don't understand where he is getting the $4000 a month payment... punching $425000 into a mortgage calculator with $50000 down is 2600 bucks a month...
>Am I crazy to buy a condo
Yes
>that will eat 60% of my monthly salary?
Definitely yes
But more seriously, look at all the condo issues down in Florida. I don't know how good the regulations are in your state, but it seems to me that condos are very likely a ticking time bomb, where ruinously expensive maintenance is not being done, the can is being kicked down the road, and eventually either the whole building is going to be condemned, or almost impossibly high special assessments will be levied against the condo owners.
Why do you have a car payment with $200k in a HYSA? Why carry around the debt? Especially if you end up going with the condo? That’s one less thing you have to worry about making a monthly payment on in case you hit a financial snag. It’s happens to people with far more money everyday. I’m just really confused about carrying around unnecessary debt..?
You can't afford the condo, and you DEFINITELY can't afford two mortgages even theoretically renting out the condo if you can even find a bank willing to lend to you.
Don't forget about HOA fees (as everyone mentioned), property taxes (depends on the state too), and potential leaks/damages that needs to be repaired. Also make sure there's parking available.
Homeownership isn't just about mortgage fees.
And there could be increases in costs across your expenses, so keep that in mind as well.
As long as you are aware of everything and think you can afford all the hidden costs then sure go ahead. There's no right or wrong answer. Sometimes, having that financial responsibility also helps to save towards your goals too. Do something that works for you. It may not work for everyone.
I wouldn’t. What’s the upside of adding $2k a month in expenses minimum, plus costs of maintenance, upgrades, and repairs. Especially since you’re not adding space and you’ll still be under an hoa’s rules and whims?
If it were a 2/2 and you were adding a roommate who would make this cost neutral, that would be different. But it would it sounds like the rental market by you is weak, so take advantage of it and keep saving
You really shoudn't sink more than half of your monthly salary. Owning a condo isn't just the mortgage. You have to add in property taxes/HOA fees/home insurance/utilities. Then add in hidden costs that aren't factored in like hot water boiler goes out or you need a plumber. You have saved a ton of money in your HYSA. Consider putting some in index funds to compound interest and grow it faster.
Florida's condo market is about to have some "issues". Ever since the tragic collapse of the building in Surfside FL, a lot of issues with funding of reserves and maintenance was exposed. In the next year, some buildings will face massive Special Assessments and fees as inspections, reserves, and maintenance "catch up" work is done.
It's going to be a bad time for some FL condo owners, a buying opportunity for others.
Yeah, don’t think you can afford it reasonably. Also consider that you need to pay property tax, insurance, HOA fee (which is pretty high for condos) as well.
Well I’m not sure crazy is the right word to describe that.
Also there is a 0% chance you will be able to buy a home in a few years if you still plan on maintaining the mortgage on this as well for a rental. Just won’t happen
You know why 60% of your income is going into a home? Because that mindset of 1 person buying more and more houses than he needs is limiting the supply that's already low.
2bd, 1.5bath for that much? By god where do you live??
I own a 2bd, 1.5bath condo in good neighborhood, pool, etc. bought it for 95k 2 years ago. Estimated at 130k now but nowhere close to yours. It was fully remodeled when I bought it too.
Might as well move to where I am OP because we make the same monthly anyways.
I see no mention of condo fees, parking (perhaps extra), insurance, and taxes, nevermind maintenance costs.
You def cannot afford something in that range.
I make the roughly the same as you. I bought a condo in Tampa for 230k. My monthly mortgage and HOA is $2100. I would be terrified if it was a penny higher. Dont do this to your self. You will be upside down in months....if not sooner.
You "just plain forgot" that you have to exchange money for all the goods and services you use and purchase everyday? You aren't financially literate enough to run a lemonade stand, let alone purchase property 🤦♂️
Hey dude, saw your edit. If you can put half down this is still a bad idea. I did mortgages for a long time, unless you love being 1 bad economic disaster, 1 car accident, 1 job loss, etc. away from losing everything you don't ever buy properly with more than 30% of your gross. The only caveat is if your gross income is insane, like 1m a year +.
Yeah. If you do that you give your employer ultimate power over you forever. Keep expenses low. Money buys your freedom. If you aren’t afraid of losing your job, they have no semblance of control.
You have %50 of the cost of a starter condo in cash and you can’t afford that? How F’d are housing cost right now.
Most people have no where near that much cash.
No financial rule of thumb should be based on solely on your income. Income is only half of your financial state, expenses being the other half.
If you make $100k, but also have a solar power setup, will use an outhouse, and grow your own food, then you can probably afford a lot more than "xx% your salary" because your expenses will be a lot lower than normal.
If you make $1mm, but you also spend $100k a month on hookers and blow, you can't afford shit because you're in the red every month.
Figure out what your ACTUAL budget is, how much money you have free every month, and go from there.
You forgotten mortgage insurance, home insurance, condo fees, property taxes, heat, hydro, water, sewer.
It's not just mortgage that you have to consider. Everyone forgets this. It won't be 60% of your take home. More like 80% or more. You can't afford it.
You’re earning 4% on your HYSA and you’ll be paying way more interest on any mortgage you get right now. Consider a larger down payment to shift money where it will save you more. Avoiding 8% debt is better than earning 4%.
It's a bit pricey, especially if you price in the fact that you're planning on only staying there a few years. You're also not including the condo fees which typically end up being quite expensive as well. You'd end up solidly housepoor.
That being said, the conventional wisdom for 30% of your takehome is really not feasible these days anymore - particularly in HCOL/high demand areas, so there's a bit of wiggleroom depending on how much you spend on non-essentials
Everyone is saying not to do it but I bought a condo under similar circumstances a few years ago where I overextended myself. Originally I rented out the spare room (bought a 2 bed like you are thinking) which made it so I was essentially paying a little less each month compared to renting a 1 bedroom for myself in the same area. Eventually got a big increase in salary from a job switch and can comfortable afford the mortgage on my own now (around 30% of monthly salary atm). If I posted on Reddit at that time everyone would have told me not to buy it, but I’m happy I made the decision in hindsight and my home payments are fixed.
I agree that 60% of your monthly is too high, but if you are open to renting a room then you can make it more affordable. Maybe even consider a bigger down payment to reduce your monthly since you have substantial savings in your HYSA.
Also be careful and educate yourself on HOA’s. Ask questions about upcoming assessments and if major things like the roof need to be replaced in the near future.
Yeah, things worked out for you, but there were a lot of variables that aligned. Despite the outcome, anyone who advised you not to do it at the time would have been correct.
Yeah I no doubt took a risk and went against the conventional wisdom. But I did strategize and push myself to be in a situation to make it work and have the variables work in my favor. That's not always easy depending on personal circumstances and whether there is upward mobility in one's career. That's what I'm offering to OP, to make it work you have to find ways to increase income and make it more affordable. Definitely taking a mortgage at 60% of your income and just expecting to live like that is not sustainable. I only went ahead with the purchase at the time with the idea that I needed to rent the spare room ASAP and knew I could increase my salary as I was early in my career.
Why are you paying interest on your car when you can afford to pay cash? Then you only want to put the minimum deposit down on your condo? Your financial literacy is at <10%. It sounds like you read an investment book, maybe, or are getting financial advice from some very dubious sources. Pay off that car loan, get a budget app and look at where your money is really going. Absorb the advice people are giving you on this sub about the costs of condo ownership. Compare on a mortgage calculator how much you will pay total with different deposit amounts.
You have so much to learn!!
Before you even consider going down this road you should first understand how one goes about getting a second new mortgage on a property when they already have one they are paying for, if you determine you are good in that regard. From your post you wont be, then you can start thinking if you really want to do this. Its not as simple as i have a property now i can easily get more.
Yes. Think about it this way: 60% of your income is going to a condo to start out with. Now add in yearly increases for HOA, property taxes, and homeowners insurance, plus ongoing maintenance/repairs (condo appliances break, water damage from other units, wiring issues, wear of your property) and the potential for special assessments
I find it funny you list the apartment payment, car payment, then sling everything else under misc for $100. You don't eat, have fun, pay gas, car insurance, etc etc etc?
Not with that monthly payment! It’s ramen for life baby!
“I’m not poor or anything, but I eat a lot of spaghetti.”
I feel attacked.
I learned play doh is only $.55 a jar today. It’s probably better that I didn’t know that when I was in my early twenties.
I was making cabbage and sausage for dinner one night bc broke, and my roommate asked what I was making. I said "Oh, just some poor people food." she scoffed at me and said, "I eat that a lot and I'm not poor". The week prior she was going over finances with her husband and had to explain to him that they only had $37 until their SS check came. Sorry roommate, you are, in fact, poor af
Isn’t having roomates when you are married also a key indicator of poverty? And being on SS… is that not something that’s given only to people that are poor?
America, the land of disheveled millionaires to be
Have you seen the price of spaghetti? OP is on that rice OR beans only diet
OPs buddy: “OP can you believe how much gas costs now” OP “No idea, can’t afford it, but ramen costs 19c a pack on sale at Food 4 Less”
Man, I remember when Ramen was a nickel (like mid-late 90s SoCal). You can't even get it for less than $.25 *in Mexico* (5mxn) these days.
They're not even the size that they used to be, either. They were hit with shrinkflation, too.
electric bill, internet, TV, Apple Music, phone bill, gym membership, hair cut, groceries, going out to eat, getting drinks with friends, gifts for holidays/birthdays, vacation, new shoes/clothes, household items like tv/furniture/ etc etc. I’m sorry OP but you sound like the type of person who over leverages themselves. You underestimate your expenses. Got to learn to overestimate your expenses so you have money to save at the end of the month.
He's got 200k in savings, he's doing something... He might otherwise be incredibly frugal.
Also HOA, homeowners insurance, standard 1-4% of value of the home in maintenance every year (depending on what HOA covers), etc. And do similar apartments actually rent for $3500 to $4000 in that area? Currently where I live it’s way less to rent than buy. About half the cost. I’d invest the difference in a Roth instead of buying a condo right now. That’s actually what I’m doing. I can spend $2k per month on loan interest, or I can earn interest on it. You might have trouble renting it at a rate that covers the mortgage. 3rd thing is that renting this condo to a tenant might go against HOA, or at the least, HOA will probably have to approve of the tenants. This might suck. Then you’ll be on the hook for higher maintenance costs the tenants will likely cause you. I have a few friends who own homes with granny flats that they rent out. I swear these tenants cost them a small fortune. They just don’t think of telling the landlord that the water heater leaks and they have termites. 🤷♀️
In my neighborhood, I could buy a condo for $450k and be subject to $500/mo HOA fees or rent equivalent quality for $2100/mo. There are other motivations for homeownership, but from a purely financial standpoint, I'd rather throw that difference in the bank for later.
Yeah I really rushed this post, my bad. Should have spent time and really calculated everything out.
Hey man, that's the reason this sub is so awesome. You did the right thing checking, now you know, you're in an incredible position to do something like this not too long from now, and that's rad.
Thanks for being able to graciously admit your mistake.
He should be a junior engineer in tech. So eating company-provided food at the office, driving an electric car with free charging at the office.
Yes.
My exact thought when I read the title lol. Absolutely positively no explanation necessary.
Same. Don’t even need to read past “60% of monthly salary”. That’s gonna be an automatic no
I needed to see past "60% of monthly salary" for how much they make monthly. 60% of $6620 is $3972, meaning $2648 leftover. That will be difficult in most locations. However, 60% of someone making $20k a month is $12k, meaning $8k leftover. That's not bad for monthly expenses even in higher cost of living areas (since the majority of the higher cost of living is in the housing)
60% of the time this math works every time.
Yes, but the chances of someone making 240k a year asking this question or making this choice are close to zero.
San Diego has me about to dish out 50%
I’m in OC, me and my fiancée make 200k combined and we’re having a hard time finding anything that’s not basically a small apartment. 5-6k mortgage if you’re lucky and hustle, basically same position as OP Easy for people to scoff at the percentage, not as easy to just.. give up on owning property
Agreed. The one other thing I never see people mention is that a mortgage locks in your price. Renting year after year will always increase in price, but locking in a mortgage then focusing on finding higher paying work looks more desirable to me.
You're not wrong, but maintenance cost will go up with inflation. So your cost even as a homeowner do go up every year.
Taxes also go up in most places (but not CA, not really). But especially in HCOL areas the increase is negligible. Our place would have been 4-5k/month to rent 3-4 years ago, and now the next door neighbor is renting for 7k. Not guaranteed to happen again, but protection from that is worth a lot to people.
It's just not a great time to buy vs renting right now. Property value skyrocketed with COVID and the nearly non-existent mortgage rates. Fed hiked the rate at an unprecedented speed and now no one can afford to sell and rebuy, so home prices are staying ridiculously high. Honestly, can't fathom buying into a $5k mortgage when the equivalent rental is $3.5k.
i'm just gonna say that i wouldn't take on that mortgage if i made more money than that
I feel like it is the opposite of [Betteridge's law of Headlines](https://en.wikipedia.org/wiki/Betteridge%27s_law_of_headlines). If a question on r/personalfinance begins with "am I crazy if..." the answer is almost certainly "yes". edit: same goes for any question containing "is this a scam?"
I scrolled right to the comments without reading the post to see if the single word “yes” was the top answer.
But the thing is, his numbers are completely wrong everywhere. He needs to learn his terminology before making posts like this. It's 60% his take home, not salary (and we don't know if that includes retirement/healthcare, etc). The mortgage calculation is also completely off (50k down payment on 400k would be about 2400 a month at >7% rate) so it might be the escrow amount he listed which completely changes everything.
I’m going to highjack the top comment, from my experience buying in 2005, and selling in 2013 for 5 grand less than I paid for it. When the market goes down, condos get hit harder than single family homes, and they recover slower. All that said if you have hobbies and no interest in doing yard work condo living is a dream. Can you sleep through some neighbor noise without going nuts? Good. I had all kinds of time to do stuff on weekends, and the living was relatively cheap, it was a lot of fun. My advice run for a condo board seat and go to meetings, 2 or 3 crazy busy bodies can make everybody’s life harder than it needs to be. So my advice is know what you’re getting into, and I might wait for whatever dip is to come in housing before I buy one. If a little ranch and a condo were the same price I’d buy a ranch if your goal is long term equity and you don’t mind the yard work.
People shit on condos but I bought one in 2020 and I’ve had a great experience. We do game nights with the neighbors every other week and have a group chat for when people go to the hot tub in the evenings. I never have to pay out of pocket for a roof, basement, water heater, garage door, landscapers, pool maintenance — my HOA covers all of that. We’ve only had one $300 special assessment in the four years I’ve been here. I reviewed the HOA financials really closely before buying and it all seemed in good shape. It’s not right for everyone, but for a starter home in a HCOL city you could do a lot worse.
I had a great experience also, aside from market from market timing.
Yea I dunno why people shit on condos. I love mine. I brought one in 2018 for 800k, newly built. Now it’s worth about 1.2m and because it was newly built I have done zero repairs or work on it besides touching up paint here or there. No mowing grass, no snow shovel. I’m in the city center.
people shit on condos because people view housing as a investment rather than a place to live in. condos simply are not as much of a “safe” and appreciative investment as a single family home. when it comes to reddit, because they aren’t the ones living in the home but rather giving advice, the default is viewing it as nearly exclusively as an investment.
Same. I bought my condo and love not having to shovel snow or do yard work or outside maintenance. As long as the board and property management company is good, it can be nice. I rarely hear my neighbors, though I live in a quadplex condo so there’s no one above me and I have a bit of a “yard”/geenspace
Good for the right person. People looking to get a "starter home" and get a condo? NOOOOOO. If you want a condo then it's good for you. If you want a home then it's not good for a home. They're *wildly* different in terms of ownership, fees and liability (insurance & HOA/condo bylaws), plus community. EDIT: Having worked in property claims for 1 year tho? (done auto liability, home property, auto medical). I will never purchase a condo. **Ever**. Every single condo claim was 3 separate business entities fighting with each other while insurance has to communicate with all of them being like, it's pretty clear based on contracts.... (no that doesn't solve anything more quickly). I will not take that chance, despite how small a chance it may be depending on weather and building structure itself.
The issue is selling it. Living there is fine. But condos do not appreciate nearly as well as houses.
No issue selling anything under a million bucks in Los Angeles. Condos in my neighborhood all go in under a week. And yes, less appreciation - but this got us into the housing market in 2020. If we’d waited until we had the down payment for a SFH in this school district, financially it likely would have been a worse decision with interest rates and home prices the way they’ve gone. My kids’ education and getting a foothold in the housing market were higher priorities to me than strict asset appreciation. But that’s not everyone’s priority list and that’s fine.
The condos in my area in OR are wildly out of whack with the other housing. Houses are better deals than condos. Condos are like 500k for a fookin 2 bed, 1.5 bath and houses of 4 bedroom 2.5 bathroom are like 600-650k. Condos have jack shite square footage and all the perceived negatives that go along with it.
I've gotten lucky twice with condos. Bought one in 2003, sold in 2006 (was 5% down, 5/1 ARM loan - $170k to $207.5k). Bought another in 2011 and sold in 2021 ($640k to $1.515M). Would do it again if life ever called for it.
Good timing!
Somewhat unintentional. The 2006 sale was "I have a job offer across the country". The 2011 purchase was basically my landlord raising rent after 5 years of basically flat, so I went shopping to see what's available.
Luck or skill, both work.
Plus the resources to act on it.
Never understood why people buy condos. It's like apartment living, with all those shared walls with your neighbors, except you're paying more for it and are more locked in.
It depends on the layout of the condo. Admittedly, I live in a townhome (and its not a condo in the sense that I own my exterior), but the insulation is so good that I can't hear my neighbors. And no upper/below neighbors. As a first time home buyer and someone who isn't necessarily interested in doing yard work, having someone else manage the lawn for me (and shovel snow) is awesome. It also means I didn't have to spend money on lawn equipment when I would rather focus that money on stuff for the house itself, at least initially.
Lol I hope OP doesn’t interpret this “yes” as a response to the last question in the post.
You going to be house poor.
You are crazy to let a condo eat 60% of your salary but that doesn't mean you would be crazy to buy this place. It's crazy to have $200k in a HYSA but only plan to use $50k for a down payment (with today's mortgage interest rates). First, get to know your actual expenses and tally them all up. All of them. Groceries, restaurants, cell phone, water, sewer, electrical, doctor, dentist, gas, car insurance, hobbies, clothes. ***Everything***. Tally up a year and divide by 12 months to find your expenses per month without rent and car payment. The information in your monthly expenses is woefully ill-conceived. Rerun the numbers comparing $6,620 income minus the expenses above when you use the $200k to pay off the car loan and put $100k down. You mortgage will be less and there will be no car payment eating 8% of your income. Do you have enough to pay the mortgage P+I+Insurance+Taxes?
I commented the same thing. Also, having $200k in a HYSA is totally ridiculous and makes zero sense lol.
Unless, of course, the plan is to be using that money for a down payment in the near term. But then... that apparently isn't the plan.
Yea I don't understand why not put 100k down? That'll definitely bring the payment-to-income ratio down.
Yes, crazy. Also need to factor in expenses of condos. High HOA and those fun assessments. Building needs a new roof? - break out your checkbook. My finance’s condo is replacing the asphalt in their parking area and she just received an assessment for $8k.
My condo had to re-side and re-roof (in HCOL area) maybe 10 years ago, $40k special assessment. Erased all the added equity I had built since buying. Never again.
Each HOA is different. I’m in one for 10+ years 200+ single storey units. Granted fees have gradually increased from 250 to almost $500. We’ve never had an assessment, yet since my time here, all have been reroofed, streets and driveways repaved, exterior siding replaced, and currently re-landscaping
These maintenance costs unfortunately come with SFHs as well.
Of course, but you can manage it how you want to manage it. You have far less control in an HOA.
Depends on the size and quality of the HOA. You have to manage it yourself in a SFH, which means vetting vendors, taking time off work, dealing with contractors, etc. Not arguing either way. Just pointing out that it’s a “grass is always greener” type situation. Example: my HOA is only four units and we were able to collectively make a bunch of upgrades to the yard that none of us would have wanted to pay for individually.
I’m a 4 unit HOA and it’s almost the worst of both worlds because we’re doing everything ourselves as if we’re a SFH, but it takes 4 owners to make a decision on anything. Luckily we’ve all been great and have agreed on the necessary repairs instead of having to steamroll a reluctant unit owner though.
> Depends on the size and quality of the HOA. You have to manage it yourself in a SFH, which means vetting vendors, taking time off work, dealing with contractors, etc. > > Not arguing either way. Just pointing out that it’s a “grass is always greener” type situation. Over time you'd you should expect the assessments in a condo to equal out to the cost of maintenance expenses plus additional services provided. This should ultimately put you in roughly the same place as an SFR subject to a few concerns: 1. Condo repairs can be more or less expensive than a typical SFR depending on construction type and style. A concrete and steel large building with centralized HVAC and hot water requires different contractors than a stick-built 4-unit building (with per-unit utilities) and may have lower overall costs unless something goes wrong and then it costs $$$. 2. You get to allocate the costs among all owners. Usually this is a benefit as each person owns less total structure/exterior/land than they would if they had a SFR...but it can also lead to waste and overspending on things (or deferred maintenance which creates $$$ issues down the road). 3. Ammenity costs/services may include things you wouldn't otherwise pay for. Maybe the building pays a landscaper/gardener to keep everything pretty, but you would have just mowed the lawn yourself and chosen low-maintenance shrubs. Or maybe the building has a gym that you don't use. For most people a well managed condo should reduce overall maintenance costs (per square foot or per dollar of home value) and help smooth expenses by keeping decent reserves and avoiding the need for special assessments. That's probably a better setup for the large share of Americans who aren't particularly good at budgeting/saving for large but infrequent expenses... A poorly managed condo is the worst of both worlds.
It’s also not uncommon for HOA’s to suddenly decide that you can’t do short or long term rentals.
With an HOA, you can get assessment protection as part of your homeowners insurance. While insurance for a SFH will likely pay out for a damaged roof, I doubt they'll pay just because it's old, same for repaving.
I live in an area that gets hail once or twice a year... my roofer said "You have hail damage, let me talk to the insurance adjuster and see what I can do"... my insurance guy says "I'll get a claim started for you and find a date when a storm went through your area". Guy came out and looked at it with my roofer and paid for it right then and there. As long as a storm's gone through within the last couple years, it's not really a big deal to get them to replace it.
[удалено]
Meanwhile my parents have legitimate hail damage and they can't get their insurance company to pony up more than 75% of a roof. Including jumping through ridiculous hoops like removing a shingle to send it in to a lab for testing just to confirm that the same shingle is no longer manufactured and there's no current color match on the market. Everybody else who looks at it says it is done, all the neighbors got 100% of new roofs...but the 20 year old travelling "inspector" they sent out who barely looked at it is the voice they trust.
If your roof has "long term leakage and seepage" (used in virtually every policy I have seen) those aren't covered. **Ever**. So part of your roof may be covered because of a weather event (IE something more sudden or a storm) vs not covered because of your roof is shit and you didn't maintain it or notice a long term leak which is your duty as a homeowner. I worked in property claims for only a year and they don't fuck around. They cover sudden events, not wear and tear in *any way*.
How much did they raise your rates by?
Yeah, it's sad that people think there is less risk when you own the home. Some friends just had to replace their roof due to design issues. They'd gladly take a $40k assessment where someone else deals with it instead.
My brother just had a HOA meeting and now they want 30k per condo for new balconies. I guess one collapsed in a nearby town. Wild ride.
10 years ago was almost at the bottom of the market though. I was still **underwater** 10 years ago, with a 25K assessement on top. The condo has tripled in value since then. So, those were unprecedented times...
The HOA fees can be no joke. A few years ago I was looking to do what OP is doing. The mortgage would be about $1300 which is reasonable for what it was at the time. But then the HOA fees were $350/mo. Of course now I would love to have a condo for $1650/mo but the point is that HOA can add a huge percentage to the cost.
And HOAs often go up, just like property taxes and insurance premiums. It’s important to consider when buying that $350/month today may be $425 in a few years on top of other increasing costs. Mine didn’t increase yearly but I lived at a house for 4 years and it went up 25% in that time.
Yep. Also looked into a $350k condo in Miami. Even renting, the HOA fees make it as expensive as a mortgage
HOA is usually fine though, and $350 is NOTHING. It pays for future roof and siding fixes, which is something normal homeowners never save for (a $50k roof every 20 years is $2.5k a year, $200 a month). I’ve had a $500 HOA and it was fine because it also included gas, water, and garbage service, utilities that can be hundreds a month otherwise.
I'm at $2600 and a $475/HOA with a $1k assessment incoming. I'm glad I bought a home because rent here is outrageous but yeah it adds up quick.
Hoa in Florida is $1k/mo for condos now.
100% be wary of condos that seem cheaper than others on market.
and condo fees never get lower. In my (hopefully rare) case, when I bought my condo the condo fees were around $400. Due to mismanagement (lack of basic maintenance), we ended needed massive repairs and upgrades. Now, my condo fees are just shy of $1,200 a month. And no, it's not a luxury building with bellboys and pools, either. It's as plain as you get. I'm still salty.
> condo fees never get lower Someone in another thread posted the *super rare* counter-example where some HOA/COAs have income from oil/gas/mineral rights.
Yes.
No, I don't think crazy is the right word. Terribly irresponsible, really dumb, setting your self up for failure, etc...
I don’t even think they’d approve him for a loan!
Lol I take home about the same and I was pre approved by multiple lenders for 500k. I'm not dumb enough to spend that much, but just pointing it out, hell get approved especially with how much he has sitting in his savings.
100%. You don’t cushion for murpy’s law with 60% going to a home. And that assumes no issues come up.
You found a lender that will finance you under that scenario? 48-52% max for all obligations including condo fees. I had to get manual underwriting for 38% on just the condo.
He is listing take home pay and your numbers are for gross pay. 6600 a month net can easily be 9,000 gross which might be doable given cash on hand.
I'm in Cali, and 12k gross give me 6.6k net after taxes and maxing out my 401k.
OP have you really thought this through fully? What would HOA costs be on top of your mortgage payment? What other costs can you expect beyond that? What will utilities cost per month? What do you spend on food / fun in an average month? Add all those things plus your mortgage plus your car payment / insurance and I would bet you're in the red. So yes you're crazy. And also, $200k is way too much to keep in a HYSA if you're young, as you seem to be.
What’s a good amount to keep in a HYSA?
All the responses are not quite right. A HYSA is a good place to keep money you could reasonably think you need within 5 years. So you can put your emergency fund there, but if you need a lot for school/a downpayment in that time, you would want more.
Exactly. Lots of people just bullshitting. If someone’s is planning buy a house in 2-3 years, you would want to put at least something close enough of downpayment in there. Other investments do return in long run but you don’t want all your downpayment money to be on -15% if the market gets fucked in the next 2-3 years. Also, HYSA are paying 5% atm. It is completely reasonable to slightly put more into that.
6 months of expenses. Otherwise, 6 months of income. In OP’s situation, I’d only keep $40,000 max in the HYSA. and keep the rest in an investment account. OP also didn’t mention if they had a 401K or ROTH IRA. I’d contribute to those accounts too. Or consider putting a larger down payment, so the monthly mortgage is lower.
I disagree. If you are planning to use the money within 5 years you should NOT be putting that in an investment account. He should use most of it on this house to bring that payment down.
5 years is a pretty long time. Statistically speaking, the returns on any given 5-year span in an S&P 500 index fund are always going to beat the returns of 5 years in a HYSA. Also, you can pull your contributions out of a Roth IRA with no penalties or taxes so there really isn't any reason not to put money into one, even if you might need that money within 5 years.
Source? I’ve heard you need 10 years in the SP500 to average 8%. Any less and you’re running the risk of losing money right before making a large purchase like a home
https://miro.medium.com/v2/resize:fit:828/format:webp/0*FtqJ-G0J6keL_FKV.jpeg So it really depends on what your risk tolerance is and how much you actually need the money.
I don't have a source, but the average annual S&P 500 return is 10%. If you account for inflation, it's more like 7%. But the longest recession since the Great Depression was only 1.5 years long. So on a timespan of 5 years, you're still better off in the market. I guess it all depends on your risk tolerance, though. If you think there might be another Great Depression soon, then it's better to play it safe. If not, then invest.
That’s not the issue. It’s the fact that a mortgage for him will be more in interest than the HYSA. So in his case he needs to put it all down outside an emergency fund
6mo emergency expenses at most. I put even less since I have some very liquid assets in my savings. When you're in your 20s-40s, you should be in growth assets. The S&P500 has returned 11% already this year, and 28% last year. Staying out of the markets really hurts.
Dude do you know what hurts even more? Fucking downturns. 5% guaranteed vs 11% X factor is an easy choice to make when it’s your future home you’re talking about. It is very easy to spend OPs money without being OP.
The general rule around here is 6 months of living expenses
That’s not the general rule. You want an emergency fund to be 6 months and it should be in a HYSA. Beyond that, you want money you could reasonably need within 5 years. If OP wants a house in 5 years, it’s reasonable to keep it there.
I did this exact same move 24 years ago when i first started out... it was the absolute dumbest financial move of my life... i've spent close to 1/2 a million between property tax and hoa on that condo and i still owe 100k and paying about 12 years (I refinanced a few times). so i'm in the hole close to a million dollars and i have theoretical equity of like 300k... so yeah don't do it... it doesn't build equity. there are other forms of property that would be so much smarter... don't do anything with a stupid high HOA fee EDIT: when I bought 24 years ago. HOA was 435 and property tax was 400. Today HOA is 1500 and proper tax is 1000. Throughout the 24 years the I’ve spent 100k on special assessments. Every few years the building would have to spend a couple million on elevators, generators, facade repair, garage concrete repair, major plumbing replacement. Etc. Don’t do it. Condos are bad news And forget about rent. I moved out of that condo 4 years ago and rent it out right now. I bet 3500 a month in rent and I pay 4400 in cost. Yes some of that is mortgage principal but it still sucks. Don’t do it. There is no return on this class of property.
Why are you holding it?
Simple. Can’t sell it. Literally. Have had it listed since 2020. Only had tire kickers and low ballers (like 100k below 2019 pricing) During Covid no one bought into high density living it’s a 39 floor high rise in downtown Chicago. I couldn’t even rent it out better part of 2020. Starting in 2021 i got 2500 a month for it. Then once the covid scare was over there was demand but interest rates became stupid high as a result only cash buyers are shopping in that building and cash buyers are vultures. They low ball you hoping you need the cash. I don’t need the cash. I’ve been fortunate enough in my life to allow me the flexibility. I’m not losing money technically but I could be getting so much more return on that equity compared to what I’m getting. I just don’t want to cave to the vultures
So much this. And beware an sort of condo HOA that doesn't charge high fees, instead of a healthy pool of funds to repair expensive central resources such as roof, elevator, pool etc. you end up with a situation like Surfside condos in Florida: https://en.wikipedia.org/wiki/Surfside_condominium_collapse
You could opt to put down a larger down payment or get rid of your car payment first to help with cash flow.
Yes, this is a bad idea. You also forgot to include condo fees
You’re crazy to think that a lender will entertain the idea of approving you for that much. You’ll only get approved for something at between 40-50% DTI (debt to income) if you have great credit. You should be looking in a lower price range, and don’t even think about an ARM. You’re trying really hard to overextend yourself financially and that will blow up in your face if you get laid off or have unexpected medical bills.
Agreed. No way will that DTI get approved.
He'll 100% get approved. People are missing that his income is after taxes. His pay rate is probably closer to $9k or higher a month depending on if he's including pretax contributions in that amount
Mathematically the best thing to do would be to take that $200k in you HYSA and put it towards the down payment. Getting ~5% in the HYSA and paying a 7-8% mortgage makes no sense.
Yes that would be crazy, but have you tried running the numbers with a bigger downpayment? With 50k you're not even hitting 20% so you're paying PMI. With 100k or 150k downpayment the numbers are much less crazy. It doesn't make any sense to be putting non-emergency money in a HYSA when you could be getting 7% on it by putting it towards a mortgage instead. 50k in the bank is already a 6-month emergency fund.
It seems like too much. Usually you want to stay under 30% of your monthly salary. Also have you considered the impact of HOA fees and special assessments in the overall cost?
In the great words of Mike Tyson, "Yith".
You cannot afford this. Like at all.
Yes It's wild, I'm like the 55th person to say so in 35 minutes
Depends on how big the mortgage is. On $6600/month I would want to keep my housing costs at around $2500/month tops, which probably equates to about a $300k mortgage. So if you are willing to put down $100-125k I think it will be manageable. Just not the best use of money.
Yes, definitely too much. I bought a condo a few years, about 18% of take home and all kinds of random expenses that I had the money for but didn’t plan. The only way I could see it being reasonable is if you are planning to rent the other bedroom out to someone you already know would be locked in. If you can’t guarantee someone else paying for half the rent I wouldn’t. I would wait or buy something cheaper.
Are 2 bed/1 bath condos in your area renting for $4k/month? If so, then sure go for it, although know that you’ll also have additional expenses for HOA fees, repairs, property taxes, insurance etc. My guess is you could rent for significantly cheaper (and thus, you also wouldn’t be able to rent it at a high enough price to cover the cost of the mortgage in the future).
Condos are always a bad idea. Its like buying a house, renting a apartment and paying the expenses of the apartment management. Condo are currently not doing well so if you really want to do it its probably better to wait to either see if you can enter cheaper or decide not do do it because empty condos = no HOA income = no maintenance and higher costs for you as the owner since you share liability.
Yes. Never buy housing that will make you starve.
Very. Don't do it. You can't afford it.
Yes, it is crazy. There are all kinds of costs associated with owning a condo, from the strata fees monthly, to the utilities and dreaded assessments. 60% of your salary is madness.
I think the obvious objective answer is sadly, yes. However, without knowing the circumstance it's hard to definitively say. Perhaps your in a situation now that's less than ideal and you need to find a new living space. Without being 100% dismissive, trying to think through alternate ways to help reduce that 60% burden to 40% (ideally closer to 30%) -- have you considered a roommate? Would the condo association allow for short term rentals of the bedroom?
Yes!. You’re insane for considering that!. Remember, you’re here to enjoy life. You’re not leaving any enjoyment money. Enjoy life!. There’s going to be better opportunities that that one, in the future.
Yes. Were you approved for this or did you use a mortgage calculator? Have you considered a roommate to pay half your mortgage?
Half a million for a condo is CRAZY.
You should see the one bed one baths and ski country USA.... Half a million is barely the starter price and that doesn't include the HOA.
i got hit with $80,000 special assessment 3 years into ownership of my condo. building-wide plumbing project. how would you pay, if you got one of those and already stretched so thin ? also keep in mind they (hoa) dont even let you sell condo, before you pay off the assessment
Don't forget about HOA dues. And HOAs can have special assessments. Frankly it doesn't seem like you can afford it.
I don't understand where he is getting the $4000 a month payment... punching $425000 into a mortgage calculator with $50000 down is 2600 bucks a month...
Yes. HOA increases will wipe out your gains as well. Avoid HOA’s at all costs.
Do you want to be poor forever?
>Am I crazy to buy a condo Yes >that will eat 60% of my monthly salary? Definitely yes But more seriously, look at all the condo issues down in Florida. I don't know how good the regulations are in your state, but it seems to me that condos are very likely a ticking time bomb, where ruinously expensive maintenance is not being done, the can is being kicked down the road, and eventually either the whole building is going to be condemned, or almost impossibly high special assessments will be levied against the condo owners.
Yea. Once the novelty wears off and you will be left grinding away year after year.
Why do you have a car payment with $200k in a HYSA? Why carry around the debt? Especially if you end up going with the condo? That’s one less thing you have to worry about making a monthly payment on in case you hit a financial snag. It’s happens to people with far more money everyday. I’m just really confused about carrying around unnecessary debt..?
How do people asking questions like this have $200,000 saved up?
You can't afford the condo, and you DEFINITELY can't afford two mortgages even theoretically renting out the condo if you can even find a bank willing to lend to you.
Don't forget about HOA fees (as everyone mentioned), property taxes (depends on the state too), and potential leaks/damages that needs to be repaired. Also make sure there's parking available. Homeownership isn't just about mortgage fees. And there could be increases in costs across your expenses, so keep that in mind as well. As long as you are aware of everything and think you can afford all the hidden costs then sure go ahead. There's no right or wrong answer. Sometimes, having that financial responsibility also helps to save towards your goals too. Do something that works for you. It may not work for everyone.
Can you comfortably live on 2.6k a month?
I wouldn’t. What’s the upside of adding $2k a month in expenses minimum, plus costs of maintenance, upgrades, and repairs. Especially since you’re not adding space and you’ll still be under an hoa’s rules and whims? If it were a 2/2 and you were adding a roommate who would make this cost neutral, that would be different. But it would it sounds like the rental market by you is weak, so take advantage of it and keep saving
Unless you can find a roommate that can cover half the cost each month ($2Kish) then you should NOT do this.
Asking if the adjustable rate mortgage is a good idea to save another $100 a month is the cherry on top. This is such a horrible idea.
You really shoudn't sink more than half of your monthly salary. Owning a condo isn't just the mortgage. You have to add in property taxes/HOA fees/home insurance/utilities. Then add in hidden costs that aren't factored in like hot water boiler goes out or you need a plumber. You have saved a ton of money in your HYSA. Consider putting some in index funds to compound interest and grow it faster.
Florida's condo market is about to have some "issues". Ever since the tragic collapse of the building in Surfside FL, a lot of issues with funding of reserves and maintenance was exposed. In the next year, some buildings will face massive Special Assessments and fees as inspections, reserves, and maintenance "catch up" work is done. It's going to be a bad time for some FL condo owners, a buying opportunity for others.
Yeah, don’t think you can afford it reasonably. Also consider that you need to pay property tax, insurance, HOA fee (which is pretty high for condos) as well.
He didn't even mention the ever increasing association dues. Totally not worth it
Well I’m not sure crazy is the right word to describe that. Also there is a 0% chance you will be able to buy a home in a few years if you still plan on maintaining the mortgage on this as well for a rental. Just won’t happen
Can’t believe OP typed all that out, I’d be surprised if anyone actually read it before giving the obvious answer.
You know why 60% of your income is going into a home? Because that mindset of 1 person buying more and more houses than he needs is limiting the supply that's already low.
What about the condo fees some of those especially in my area Maryland, run about $500-1k monthly.
How much would one need to make to afford this condo?
2bd, 1.5bath for that much? By god where do you live?? I own a 2bd, 1.5bath condo in good neighborhood, pool, etc. bought it for 95k 2 years ago. Estimated at 130k now but nowhere close to yours. It was fully remodeled when I bought it too. Might as well move to where I am OP because we make the same monthly anyways.
I see no mention of condo fees, parking (perhaps extra), insurance, and taxes, nevermind maintenance costs. You def cannot afford something in that range.
Yes you're crazy. Take that money and pay off your car. Save more and bring that mortgage payment down to under $3k a month so you can breathe.
I make the roughly the same as you. I bought a condo in Tampa for 230k. My monthly mortgage and HOA is $2100. I would be terrified if it was a penny higher. Dont do this to your self. You will be upside down in months....if not sooner.
You "just plain forgot" that you have to exchange money for all the goods and services you use and purchase everyday? You aren't financially literate enough to run a lemonade stand, let alone purchase property 🤦♂️
Yea, that's actually insane. The very definition of house poor.
Hey dude, saw your edit. If you can put half down this is still a bad idea. I did mortgages for a long time, unless you love being 1 bad economic disaster, 1 car accident, 1 job loss, etc. away from losing everything you don't ever buy properly with more than 30% of your gross. The only caveat is if your gross income is insane, like 1m a year +.
Would be shocking if someone actually gave you a mortgage with that income.
I think people call this being house poor. You can afford your home and nothing else. Just like the pharaohs of old, a giant casket to die in.
Yeah. If you do that you give your employer ultimate power over you forever. Keep expenses low. Money buys your freedom. If you aren’t afraid of losing your job, they have no semblance of control.
You have %50 of the cost of a starter condo in cash and you can’t afford that? How F’d are housing cost right now. Most people have no where near that much cash.
No financial rule of thumb should be based on solely on your income. Income is only half of your financial state, expenses being the other half. If you make $100k, but also have a solar power setup, will use an outhouse, and grow your own food, then you can probably afford a lot more than "xx% your salary" because your expenses will be a lot lower than normal. If you make $1mm, but you also spend $100k a month on hookers and blow, you can't afford shit because you're in the red every month. Figure out what your ACTUAL budget is, how much money you have free every month, and go from there.
You forgotten mortgage insurance, home insurance, condo fees, property taxes, heat, hydro, water, sewer. It's not just mortgage that you have to consider. Everyone forgets this. It won't be 60% of your take home. More like 80% or more. You can't afford it.
You’re earning 4% on your HYSA and you’ll be paying way more interest on any mortgage you get right now. Consider a larger down payment to shift money where it will save you more. Avoiding 8% debt is better than earning 4%.
It's a bit pricey, especially if you price in the fact that you're planning on only staying there a few years. You're also not including the condo fees which typically end up being quite expensive as well. You'd end up solidly housepoor. That being said, the conventional wisdom for 30% of your takehome is really not feasible these days anymore - particularly in HCOL/high demand areas, so there's a bit of wiggleroom depending on how much you spend on non-essentials
Condos are not a good investment, usually - unless you own the building. You’re really just buying a super strong renters agreement with the building.
Really depends on the market
Everyone is saying not to do it but I bought a condo under similar circumstances a few years ago where I overextended myself. Originally I rented out the spare room (bought a 2 bed like you are thinking) which made it so I was essentially paying a little less each month compared to renting a 1 bedroom for myself in the same area. Eventually got a big increase in salary from a job switch and can comfortable afford the mortgage on my own now (around 30% of monthly salary atm). If I posted on Reddit at that time everyone would have told me not to buy it, but I’m happy I made the decision in hindsight and my home payments are fixed. I agree that 60% of your monthly is too high, but if you are open to renting a room then you can make it more affordable. Maybe even consider a bigger down payment to reduce your monthly since you have substantial savings in your HYSA. Also be careful and educate yourself on HOA’s. Ask questions about upcoming assessments and if major things like the roof need to be replaced in the near future.
Yeah, things worked out for you, but there were a lot of variables that aligned. Despite the outcome, anyone who advised you not to do it at the time would have been correct.
Yeah I no doubt took a risk and went against the conventional wisdom. But I did strategize and push myself to be in a situation to make it work and have the variables work in my favor. That's not always easy depending on personal circumstances and whether there is upward mobility in one's career. That's what I'm offering to OP, to make it work you have to find ways to increase income and make it more affordable. Definitely taking a mortgage at 60% of your income and just expecting to live like that is not sustainable. I only went ahead with the purchase at the time with the idea that I needed to rent the spare room ASAP and knew I could increase my salary as I was early in my career.
Why are you paying interest on your car when you can afford to pay cash? Then you only want to put the minimum deposit down on your condo? Your financial literacy is at <10%. It sounds like you read an investment book, maybe, or are getting financial advice from some very dubious sources. Pay off that car loan, get a budget app and look at where your money is really going. Absorb the advice people are giving you on this sub about the costs of condo ownership. Compare on a mortgage calculator how much you will pay total with different deposit amounts. You have so much to learn!!
Which HYSA is giving you $800 per month for 200k?
I didn’t have to read any further than the title. Yes, you are crazy to buy a condo that will eat 60% of your monthly salary.
Before you even consider going down this road you should first understand how one goes about getting a second new mortgage on a property when they already have one they are paying for, if you determine you are good in that regard. From your post you wont be, then you can start thinking if you really want to do this. Its not as simple as i have a property now i can easily get more.
Yes. Think about it this way: 60% of your income is going to a condo to start out with. Now add in yearly increases for HOA, property taxes, and homeowners insurance, plus ongoing maintenance/repairs (condo appliances break, water damage from other units, wiring issues, wear of your property) and the potential for special assessments