First Job: House or Apartment?

[Cattlegod]

So, in May I'll be starting my first post-graduation job. I'll be making more than enough money to support myself comfortably, but I can't decide if I want to buy a house (or condo) or rent an apartment. I'm currently single and don't have any expected large future expenses. I'm fortunate enough to be graduating with zero debt, and about $5000 saved.

If I were to buy a house, I would likely live with my parents for 4-6 months while I save up enough for a down-payment on a house. I figure that I will be taking home somewhere around $3600-$4000 per month after 401k, taxes, insurance and everything. I am currently leasing a car which will cost me a little bit less than $500/mo including insurance and gas. I would also pay my parents some yet undetermined amount for their hospitality.

The main reason I want to live at home and start saving to be able to buy a house ASAP is of course because the housing market is so cheap right now. I'd probably be looking at a ~$150k house with $20-30k down. Six months should allow me to save that much. I'm going to be in the Detroit area (specifically, looking at the Novi/Northville/Canton/Plymouth area, for those familiar).

Alternatively, I could just go straight to an apartment while saving for a house. Probably for a year minimum, maybe two? It might allow me to meet some new people in an area where I know nobody, but at the same time it's not an investment like real estate.

I feel like I'm worrying too much and being too stingy for a 22 year-old. Well, what do you guys think?

Do you know the detroit area well at all? At your age, you want to be in Royal Oak. I moved here when I was 23 after undergrad, it is by far the best place to live in SE Michigan for a single 20-something.

 

[rcpratt]

Do you know the detroit area well at all? At your age, you want to be in Royal Oak. I moved here when I was 23 after undergrad, it is by far the best place to live in SE Michigan for a single 20-something.

I know the city and the west side of town, lived in the Northville/Novi area until I was about 15. I admit I don't know much about the north side of town, but I'd love to hear more about what you think about Royal Oak. Finding an area that is good for 20-something singles is something that is pretty important to me.

 

[Bignate603]

Nice guess, 70k it is. The numbers I've worked up are with 8% 401k (6% matched by my company) and federal, state (4.5%), and Detroit (1%, ridiculous) taxes. Not sure how much my insurance is going to cost me.

Running through the taxes and your 401k I think you're looking at a bit less than $48k after just that. With your insurance and possibly other things you're probably going to be at the lower end of your estimate for take home per month.

 

[sdifox]

err, too early to commit to a mortgage. rent for a while and save up a down-payment.

 

[nageov3t]

it's your first job. presumably you're starting at the bottom of the totem poll, and first hired usually equals first fired when layoffs come around.

if you lost your job tomorrow, how long could you keep yourself afloat before getting foreclosed on? a foreclosure is going to hurt your credit a lot more than breaking a lease and moving back in with your parents.

 

[rcpratt]

it's your first job. presumably you're starting at the bottom of the totem poll, and first hired usually equals first fired when layoffs come around.

if you lost your job tomorrow, how long could you keep yourself afloat before getting foreclosed on? a foreclosure is going to hurt your credit a lot more than breaking a lease and moving back in with your parents.

Good point, something that I hadn't given a lot of though to.

I'm working for an electric utility, which is a fairly stable business...even in Detroit. I'll be working on licensing a $10billion project, and then will start actual engineering design on that project when it's underway. I would consider my situation fairly low risk, but I definitely need to give it more thought.

 

[nageov3t]

Good point, something that I hadn't given a lot of though to.

I'm working for an electric utility, which is a fairly stable business...even in Detroit. I'll be working on licensing a $10billion project, and then will start actual engineering design on that project when it's underway. I would consider my situation fairly low risk, but I definitely need to give it more thought.

never know when someone completely out of your control could happen that leads to you getting fired because someone higher up F'd something up and decided to pin it on the new guy, unless you've got a good contract

 

[DrPizza]

If it's a promising job with a decent chance of advancement, and you figure on staying in the area for several years (or longer), then I'd go the home ownership route.

When buying a house, you should really have at minimum a 10% down payment saved up. The building itself might not be expensive, but remember that you'll have to pay for your own maintenance, taxes and utilities in a house. You'll also need to buy your own fridge and stove. Those things are usually included with your rent. An apartment or rental home is the best to start out with.

Oh nooooes! I think the cost of a fridge and stove are pretty trivial compared to the 20% down payment he claimed earlier that he felt he could make.

Another alternative, if your parents are cool with it - live like a pauper for a couple years, staying at your parents house. Drive an older car, not a 2010 vehicle. You could save enough in 2 years to make one hell of a down payment - and that might be enough time to be sure you have job security.

I'm not 100% certain of the Detroit market, but it seems that real estate prices in that area make ownership a better option than renting (in general.) Just think - you could save for 2 years, make a huge down payment, and by the time you're in your late 30's, you could own your house outright. No mortgage payments when you're 38? Sounds pretty sweet to me.

 

[Bignate603]

Oh nooooes! I think the cost of a fridge and stove are pretty trivial compared to the 20% down payment he claimed earlier that he felt he could make.

Yes, but when the roof starts leaking or the furnace dies after he moves in he might be in a tight spot. Buying a house you really need more than just a downpayment, you need some emergency cash stashed away.

 

[rcpratt]

If it's a promising job with a decent chance of advancement, and you figure on staying in the area for several years (or longer), then I'd go the home ownership route.

Oh nooooes! I think the cost of a fridge and stove are pretty trivial compared to the 20% down payment he claimed earlier that he felt he could make.

Another alternative, if your parents are cool with it - live like a pauper for a couple years, staying at your parents house. Drive an older car, not a 2010 vehicle. You could save enough in 2 years to make one hell of a down payment - and that might be enough time to be sure you have job security.

I'm not 100% certain of the Detroit market, but it seems that real estate prices in that area make ownership a better option than renting (in general.) Just think - you could save for 2 years, make a huge down payment, and by the time you're in your late 30's, you could own your house outright. No mortgage payments when you're 38? Sounds pretty sweet to me.

Thanks. I have put some thought in to fridge, washer/dryer, etc. cost, and I don't think it's going to be something that will make or break it either way. At the very worst, I can wait a month or two longer to save for that. I already have a nice 50" plasma and TV stand, and my parents have more than enough old furniture that they'd be willing to give me.

My parents probably would let me stay for a year or two, but I don't think that's something I could handle. Don't get me wrong, I love my parents and we actually get along disturbingly well, but I've been home for 3 days for spring break now and I already feel weird.

A car is another issue that I have looked at. I currently drive an '08 Fusion that I like a lot. It's a lease that will be up about 11 months from when I graduate. My dad works for Ford so it's a very discounted rate. Originally I had hoped to pay cash for a one-year-old '10 Fusion when the lease was up. I really love the car, and the new models get great gas mileage. But the cash part definitely isn't going to happen if I end up buying a house. Not something that i have to worry about for awhile, anyways.

 

[Corporate Thug]

Fresh out of school with no debt/wife/family? I'd definitely look to rent no questions asked without losing a wink of sleep over it. Go a year or two in Detroit and decide if that's what you really want and see WTF the housing market ends up doing.

No point in plunking down money right now with no real roots planted. Build up a nice warchest of money and keep yourself liquid.

Is there any real doubt that the housing market is on a slow and steady rise? This is a serious question.

I've been condo shopping for about a year now (serious looking for 6 months or so), and the market has just gone up and up. It's to the point where I can't afford a place I was looking at a year ago

 

[PowerEngineer]

It seems I'm out of step with the majority, however I'd lean against buying a house immediately. I'd wait until I knew that I wanted to stay with that first job for a number of years (wouldn't want to have to sell any time soon). Hold on to your freedom from commitments for as long as you can

 

[lxskllr]

Pay rent to a landlord, or pay rent to the government. You'll be renting in any case. The first kind of rent, someone else is responsible for upkeep and maintenance. In the second example, you're responsible.

 

[nageov3t]

Is there any real doubt that the housing market is on a slow and steady rise?

in Detroit?

 

[rcpratt]

It seems I'm out of step with the majority, however I'd lean against buying a house immediately. I'd wait until I knew that I wanted to stay with that first job for a number of years (wouldn't want to have to sell any time soon). Hold on to your freedom from commitments for as long as you can

Looks like the majority is also against the house, although that crowd is fairly vocal.

 

[BoomerD]

Since this is your first job, I'd hold off on buying until you're well established in the job, through any probation period, and can put some serious $$$ in the bank for a down payment and incidentals.

If your parents are ok with you living at home, (are you Asian?) then that'd be the cheapest albeit perhaps most inconvenient option.

If you're "dying" for your freedom," then rent a decent 1 br. apt for a year or so.

 

[rcpratt]

I'm not Asian, and I would not stay at home for more than a few months, tops. If I'm renting I'll be out as soon as I find something.

 

[rchiu]

The question is how set are you on living in Detroit. If you are born and raise there, and made up your mind to stay in that area, and your family is already there. Well I guess it's okay to go ahead and buy a house and take advantage of the current low price. Buying a house really limit your option if your first job doesn't work out. But if you are set on staying around the area then I guess that doesn't really matter.

 

[masshass81]

At your age, I would suggest renting for all reason mentioned. There are a lot of responsibilities and costs you don't realize now. The bottom line is you want to live out on your own. You can do that by renting. If you decide to take a sweet opportunity on the other side of the city or out of state, you can do that easily. If you own a home, that seriously limits your options since you're kind of "stuck". You can sell, but there's a chance the housing market won't appreciate as much. You also have to pay closing costs and ~4 - 6% of the sale price to the realtor (at least in CA).

Once you've established yourself and know where you want to end up, then I would look into real estate. Your income is going to go up and based on your current salary, I don't think you'll be priced out in a year or two, especially in Detroit.

 

[killster1]

prob depends how cool your parents are and if you want to get laid! id say get a house i have 3

 

[postmortemIA]

OP, your calculations that you can save in 6 months for decent downpayment are too idealistic.

 

[Mr. Lennon]

Rent, so you can leave detroit easily.

This.

 

[HannibalX]

I would rent an apartment for several years in different areas to see where you like living and then purchase a house. This is what I did. I found that areas I thought I would like living I actually hated and if I had bought a home right off the bat I would have been miserable.

 

[Vette73]

Oh wait you are in Detroit you could get a house for less then a months rent most anywhere else. Really doesn't matter in that case.

Have you seen the property taxs that are charged in Detroit?


BUt I voted house beffore I saw it was Detroit, so change at least 1 of those house votes to Apartment.
Stay at home for at least a few months to get a decent nest egg to cover anything that comes up. Then get a low price, but nice, apartment.

 

[JimmiG]

I voted apartment but that's because I would never consider a house. One full-time job is enough