Rent or Buy?
March 6, 2009 10:00 AM   Subscribe

Rent vs. Buy with complications. Help me settle an argument that is threatening our relationship.

Me and my boyfriend are renting a $1000 a month 700sq ft. apartment in New Orleans. I have $1000 in savings, he has $17,000. He wants to buy a house. Houses in the city go for $250,000+ in non-flooded neighborhoods. I do not own a car. I bike to the central business district every day. To buy a house in the suburbs is -$100,000 easy. But I would have to buy a car, pay insurance, possibly pay a $2 toll, pay $6.50 a day to park at work, etc. He insists we can get a cheap run-down house for $75,000 and save money. I don't think so. With an hour-long commute each morning, house repairs, extra utilities like water and sanitation (God, plumbing is expensive), having to buy major appliances, furniture, etc. we will be lucky to break even. Neither of us have ever owned a house before. Am I over-reacting? I am this [] close to telling him to buy his own damn house and finding myself a roommate.
posted by domo to Work & Money (28 answers total)
You don't want to buy a house. There's your answer.

(And no, you aren't overreacting. And I am married to a realtor and telling you that.)
posted by St. Alia of the Bunnies at 10:06 AM on March 6, 2009 [1 favorite]

First of all, $18k ain't that much in home-buying terms and I wouldn't really even call your $1k "savings" in this context. But humor him. Have him go to the bank and see what loans he (and you both, by extension) qualify for. This may provide one answer. Secondly, have him find those $75K houses by which you will save money. Have a reasoned discussion on the merits of each one. Thirdly, start following economic news and make it a part of your relationship so you can both be on the same page as far as the outside money world goes.

However, buying a house is not about "breaking even," and furthermore you sound like you are dead-set against the idea completely, so you just may need to be an adult and explain to him why that is.
posted by rhizome at 10:07 AM on March 6, 2009

Continue to rent. If you are this [] close to splitting up over the issue, you will not make it through a 15- or 30-year mortgage.
posted by Houstonian at 10:08 AM on March 6, 2009 [2 favorites]

Write down all the calculations, and present those to him. Conversations like this can easily get bogged down in emotion and baseless worry - on both parts. So figure out what worries are real, what financial burdens it would cause. Back your information up with sources. Research the toll, whether you'd definitely need a car, what the house payments would be. Research everything. Write it all down. Then say to him, "Look. This is what I found out." Figure out your expenses now, your income, his income and expenses.

Facts are your friend. I know, it sounds over simplified, but if you have it all in black and white and he refuses to see it for what it is, then you at least know there are other issues you two need to work out. It could be that he's just stubborn, and refuses to see logic, which indicates a larger issue you need to face.

(Brockles taught me this. He is the logical one, damn him. So logical. It irritates me sometimes.)
posted by routergirl at 10:10 AM on March 6, 2009

First separate conjecture from facts. Facts you can put into a spreadsheet and see unfold in front of you whether or not you can afford it, and how it plays into your long term financial goals

Conjecture is things like will I like this new lifestyle? And only you can answer that.
posted by jeffamaphone at 10:14 AM on March 6, 2009

I think you defitnitely should tell him to get his own damn house. Maybe, leave out the damn part. I wouldn't get tied up in home ownership with someone who's not currently my spouse. Especiallly, if I didn't want to buy in the first place.

This is coming from someone who is still dealing with a home seven years later from my previous marriage.

It's a can of worms. Let him open it himself. Don't sign anything unless you want to lease a room from him in his new house.
posted by studentbaker at 10:22 AM on March 6, 2009 [2 favorites]

The only reason to buy a "cheap run down house" is if you are a house flipper, renovate it and sell for profit.

Home renovations cost more than most people realize. You could easily spend 50K fixing up a place to make it sellable again. Which leads me to another point. The only way you are going to save money by buying a "cheap run down house" is if you continue live in it still run down. If that is the case then you better plan on living there a damn long time so you don't lose money on the house should you ever need to sell it.

The whole buying a run down house doesn't make a lot of sense to me unless he knows someone or is well trained in doing home renovations. Half of most renovation budgets are dedicated to labor costs.

While I agree that it is better to spend 1000 on a mortgage than rent, you have to wait for the right opportunity and the right time for both of you. Sounds to me like this is not the right time for you.
posted by deebs at 10:26 AM on March 6, 2009

Just looking at numbers: If you bought a 75K house with 5K down (assuming you could get the loan), your monthly PITI would be about $550. If you bought a modest new car, your monthly payments on that would be around $350 for the car loan and $50 for car insurance. So you're up to $950 already. Gas and parking would put you over $1000.

Of course, if you buy a house you are "building equity" that you could recoup someday, and there are tax benefits that I didn't work into the above numbers. Also of course, we're in the middle of a housing bust, so you might be building a diminishing amount of equity. There are also new responsibilities for fixing stuff when it breaks.

The numbers fail to address all kinds of quality-of-life unquantifiables that are at least as important. What kind of area do you want to live in (are you a confirmed city-dweller or would you be happy in the suburbs)? Can you find a house for 75K that you like? Can you stand having your life sucked away by those hour-long commutes?

You and he may differ over the unquantifiables, regardless of what the numbers dictate. Home ownership may hold an appeal to him that trumps other considerations. Talk to him about whether this comes down to numbers or unquantifiables for him and for you, and make your own case.

It might be instructive you drive around on Sundays and visit some open houses, and to talk to a loan officer. But make it clear that you're going this far to illustrate the problems with his plan, not to endorse it.
posted by adamrice at 10:28 AM on March 6, 2009

Might there be a compromise where you buy a cheaper condo near where you live now? Make some concessions during the argument so that it's not an ultimatum, This or That only, situation. Assuming he is willing to see your side and make concessions of his own. If he ain't, he's just being a prick.
posted by Potomac Avenue at 10:39 AM on March 6, 2009

Too many people believe that it's better to buy than to rent because of the 'building equity' argument. The truth is that in the early years of a mortgage your payments go almost entirely to interest and the equity gains are minimal.
Calculate what your total monthly payments would be under the 'buy a house' scenario and start paying that much now into an account from which your current rent and related expenses are paid. Whatever surplus builds up in that account will likely be far greater than any equity gains from buying a house.
posted by rocket88 at 10:46 AM on March 6, 2009 [1 favorite]

why does he want to buy a house?

is it because he thinks he'll "save" money with a mortgage payment instead of rent?

do you guys currently do a lot of things in the city for fun? like, can you walk to the grocery store or do you go to dinner/bar with friends regularly? is the library nearby?

have him imagine having to drive from the suburbs everytime he wanted to come in town - not to mention finding a parking spot, paying for parking, time it takes to all of this etc.

he may just have been watching too much HGTV and has idealized views of doing house renovations. this happened to a friend of mine. that $80K house she and hubby got? within 3 years - some major plumbing issues, stove went, central heat/ac unit went, not to mention the 1000s of dollars spent on renovating the overgrown backyard, fixing the broken down porch (because it turned into structural damage rather than just the porch). and the unexpected medical thing i won't go into.

did i mention those friends can't afford to go out much? and that their weekends are usually busy doing "house stuff"?

it's so nice to have a landlord to take care of those thing!

i'm just saying we only know why you don't want to buy a house - maybe he needs some reasons HE doesn't want to buy a house that aren't about you needing a car to get to work.

good luck!
posted by sio42 at 10:46 AM on March 6, 2009 [1 favorite]

You have two problems:

1.) Neither of you have really sat down and gone over all the numbers. House prices, rent, remolding expenses, buying a car... it sounds like you both only have vague ideas about what these things really cost. That's fine, you have to start somewhere, but it's really to early for number...

2.) Which is the fact that you're having a very emotional reaction to something you don't know a lot about. What I mean is that "arguing" over this type of plan is silly at this point when you both have so much more research to do.

So yeah. You are over-reacting. If you want to prove your point, divest yourself emotionally, and actually put some numbers down on paper and PROVE to yourself and your boyfriend which ideas are the better.
posted by wfrgms at 10:47 AM on March 6, 2009

He's probably low-balling the total cost of home-ownership because it's something he really wants. Assuming you could get the loan for the $75k house, you should have some extra money -- at LEAST $10k -- for the inevitable repairs. Also factor in property taxes; my annual property taxes cost nearly as much as my mortgage, which really caught me off guard when I bought my house.

Maybe you could compromise on a condo in an area that wouldn't force you to buy a car?
posted by qxntpqbbbqxl at 10:50 AM on March 6, 2009

If you want to prove him wrong, put it all into a spreadsheet. Search online real estate listings for examples of these 75K houses. Find out what the mortgage payments would be on that loan. Find out what utilities, insurance, etc would cost. Figure out moving costs, including closing costs on the house, a home inspection, etc, and divide them by 12 for a monthly amount. Guesstimate a monthly house maintenance amount (forget about actual improvements for now, you just want the place to be livable). Find a reasonable car for you and determine it's monthly payments, maintenance, gas, toll charges, parking fees. Don't guess -- actually figure out the real values. Also, include the lost interest on his 17K (not much, but could be ~25/month). Give your time a monetary value -- that's an extra 2 hours a day you'd be spending on a commute, and it's definitely worth something. Put everything into a spreadsheet. Then add up the totals. Present this to him, as I can't see how it could possibly be under $1000/month either.

In short, you need to be a smart home owner, not an emotional one. If actually want to be one at all. This is the biggest and most important purchase of your life -- you shouldn't be guilted into it, it should be what you want to do.
posted by cgg at 10:53 AM on March 6, 2009 [1 favorite]

Me and my boyfriend are renting a $1000 a month 700sq ft. apartment in New Orleans. I have $1000 in savings, he has $17,000. He wants to buy a house. [...] I am this [] close to telling him to buy his own damn house and finding myself a roommate.

If you're close to breaking up, instead of you both putting your names on the mortgage, you could say to him "As you're putting down the majority of the deposit, maybe the house should be entirely yours, and I'll pay you $500 a month in rent".

If you end up breaking up, it's much less hassle, and you're only out the rent you would have been paying anyway. If you end up getting married, you get half the house anyway. So it works out fine for you either way.

But I would have to buy a car, pay insurance, possibly pay a $2 toll, pay $6.50 a day to park at work, etc.

Is there no public transport? Trains, busses, that sort of thing? Admittedly they can be unreliable, but they should cost less than $8.50 a day.
posted by Mike1024 at 10:57 AM on March 6, 2009 [2 favorites]

You might want to look into buying a condo as opposed to a house, as this cuts down on a lot of unexpected costs. Buying a beater home is probably not a good idea, unless you are both particularly good handymen. And you do sound like you are overacting a bit.
posted by chunking express at 10:57 AM on March 6, 2009

One other aspect of home ownership that I wish I'd known is how deep your roots get set and how hard it is to move if you want to. I happened to have bought a house in a mildly crappy neighborhood with some gang banger dinks down the street. It isn't hell but I can see it from my window.

We are in the process of looking for a place to rent in a better neighborhood so we can then turn around and rent out our house.
posted by fenriq at 11:07 AM on March 6, 2009

Go with Mike1024's idea and let him buy the house and you pay him rent. I did that in a relationship recently, and it worked out perfectly. Except, I was the one buying and my partner paid me rent.
posted by sulaine at 11:36 AM on March 6, 2009

Don't try to justify what you want, or don't want in this case. Life sounds great. If he wants a house, let him go buy it. If you are not married, don't have kids on the way and aren't the home improvement type, there's really no objective reason to own a home. They are a ton of work. They are really expensive.
Think of it like this: "I don't want to see that movie, I don't like Tutti-Frutti, I don't want to buy a house". No justification required in any of these cases. Be strong.
posted by Carmody'sPrize at 11:43 AM on March 6, 2009 [1 favorite]

It sounds like you are satisfied with your current situation, in terms of both finances and location. If it weren't for your boyfriend pushing for it, you wouldn't even be considering buying a house or moving out of the city. He may not realize that, in those terms. Have you had a conversation in which you said, "If it weren't for the fact that I'm in a relationship with you specifically, and this is something that you have suggested, I wouldn't even begin to consider this."

If this proposed move would require you to make more changes to your life-decisions and mindset than it would require him to make, you may want to bring that out in the open. This isn't about money, it's about commitments. And just because you're in a committed relationship doesn't mean you're willing to rearrange the rest of your life as the cost of being with him.
posted by RobinFiveWords at 11:53 AM on March 6, 2009

It's absolutely worth drawing up an spreadsheet of the real costs of renting vs. buying, and having a neutral discussion about the pros and cons. I strongly suggest that you do that. But, although I don't want to get too fuzzy-wuzzy here, it's also worth doing an emotional inventory. A house isn't just a financial transaction. It's a home, and that comes with lots of baggage -- and very different kinds of baggage for different people.

At this point, it sounds like both you and your boyfriend are talking more about the abstract idea of a house than the actual transaction. So, what does that idea mean to you? What does it mean to him? Is "buying a house" his way of saying he wants to settle down, have kids, be more self-reliant? When you think about buying a house, does it make you feel trapped? Does it reinforce a power imbalance in your relationship with him? These are just guesses, but I'm sure if you talk it out you may be able to figure out the ways that your individual needs & emotions are tied into the idea of a house.

You may find that you guys have some mutually incompatible desires. You may also find that there are other things you can do to meet your needs (ie, plant a garden, start splitting expenses more equally, etc). And don't underestimate the benefit of making plans together. If you guys do decide that you want to buy a home together in the long term, starting to put money into a joint account together can be a powerful way of demonstrating that intention.
posted by ourobouros at 12:05 PM on March 6, 2009

Thank you all for your comments. I like the idea of renting from him. He used to work in construction and really likes the idea of being able to tear down a wall on a whim and do his own thing with his property. I like living in the middle of things and being able to walk to the grocery store or farmer's market. We are both quite familliar wth powertools and I wouldn't mind helping him build up a house. I just don't want to live in the middle of nowhere. We have been together for almost 4 years. I love this man, but he has been driving me up a wall with the house talk. We just had lunch together and reached an agreement to look in Gretna or Algiers, both of which have a ferry that can take me and my bike to downtown whenever I want. We are going to go driving this weekend and see.
posted by domo at 12:07 PM on March 6, 2009

Mike1024, I just wanted to say that your comment made me think about the ferry to and from the suburbs on the south side of the city. Before that, we were only looking on the north side of the lake. Sometimes answers are right in front of you.
posted by domo at 12:12 PM on March 6, 2009

We bought our first house this year and the idea of buying a house to save money is just laughable. Owning a house is EXPENSIVE. Especially if it's a run-down "bargain" buy. Don't do this. It doesn't feel right and it doesn't make sense. It may mean the beginning of the end of the relationship, but breaking up now versus breaking up after you jointly own property are vastly different, and I think ultimately you'll be happy you're doing the former and not the latter if it does indeed come to that.
posted by kate blank at 12:13 PM on March 6, 2009

Here's an idea: sit yourselves down in front of a computer and start plugging numbers into one of the many available online rent vs. buy calculators (NYT, Yahoo, Ginnie Mae). This will allow you to investigate the financial impact of different housing strategies. Its easier than drawing up your own spreadsheet, and by focusing you both on an external calculator it may help defuse some of the tension (its less bruising to the ego to have your assumptions proven wrong by a computer program than challenged by your partner). You may both be surprised.
posted by googly at 12:17 PM on March 6, 2009 [1 favorite]

Wait wait wait.... I missed that. You're in New Orleans?! I'm going through almost the exact same thing with my boyfriend of 1 1/2 years, and we live in New Orleans. He'll be closing on the house (in Broadmoor) sometime this month. MeMail me if you have other questions or want to talk. Renting from him is a great idea for now.

And goodness sakes, Gretna is for quitters!
posted by Night_owl at 12:19 PM on March 6, 2009

It's a can of worms. Let him open it himself. Don't sign anything unless you want to lease a room from him in his new house.

Yes, but when the marriage breaks up make sure you're get your share.

Buy a house together. You don't need to love in it, put tenants in it and when you're ready you can move in/sell what ever.

House prices are historically low, interest rates are historically low. You have 20k? Buy a house.
posted by mattoxic at 12:53 PM on March 6, 2009

House prices are historically low, interest rates are historically low. You have 20k? Buy a house.

What happens when a financial emergency happens, and you realize you've wiped out your emergency fund for this? There is something to all this talk on the TV about a mortgage crisis, after all.

Sorry mattoxic, nothing personal... just trying to put some perspective on the idea of putting all your eggs into one basket.
posted by zhivota at 1:41 PM on March 6, 2009

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