Are the tax benefits and ROI on buying a house today in a high COL city worth doubling your monthly housing expenses?
In the DC/VA/MD area a 1-2 bed condo or townhouse in the neighborhoods we’re interested in typically go for an average of $4k a month in rent, or $800k-$1.3M to buy comparable (so monthly cost of $7k-$10k for mortgage + other expenses to owning). That’s the cost for places that aren’t even that nice, which is wild. Assuming we’re spending $48k annually on rent today, if we bought a house we’d be looking at $84k to $120k a year to housing costs — ****my question is: would the home owning tax deductions and ROI really claw back that $36k to $72k a year delta on housing costs — not to mention the $200k up front cost?**** Am I really throwing money away by renting? Would I be better off putting that delta into a VOO or similar ETF? Any recommendations on how we should go about calculating and considering that? —— More info on us if it helps with your answer: we are a couple in our mid-30s who are moving to the DC area this month and plan to start a family within the next year. We both work in tech with total household taxable income of around $450k. Currently we have no eligibility for any meaningful tax breaks at our income level without kids/house and feel like we’re getting slaughtered by the man (currently in 32% tax rate, and 23% effective tax rate). It’s important to us to live in a walkable place so the neighborhoods we’re considering living in the DC area right now are on the more expensive end for the amount of space you get — in 5 years or so when we have 2 kids we’d be more open to moving deeper in the burbs (where houses tend to be just as expensive but you get a bigger bang for your buck as far as square footage). Right now we miss SF and the city life too much to jump straight into the burbs. Today (pre-kids) most of our paychecks are going to 401k, ESPPs, rent and basic expenses, and when we splurge it’s really only on travel and even then we’re super frugal and always look for deals or stay in more casual hotels etc. With that frugal mentality it’s been REALLY hard for me to even consider doubling our housing costs for the same (or in some cases even less) space! Plus soon we’ll be adding really expensive childcare and child costs based on the high COL of the DC area. Ugh I need advice — to buy or not to buy? #investments #homeowner #roi #taxes #stocks #realestate #dc #nova #virginia #maryland #rent #renter #personalfinance #personal finance
I'm trying to sell because buying was a mistake, and nobody will buy
Damn what market? And what was the price point you got it at and your mortgage rate?
No. After 5 years, unless the house appreciates significantly, you barely own a larger portion of the home. Buying is prohibitively expensive in many major cities and should only be done if you absolutely need to (e.g. you need room and stability for a family, etc). Growth of housing assets does not regularly outpace standard investing and comes with additional responsibilities, costs, and stress.
+1 to the comment above. It is not a good time to buy now but owning your primary residence can give you peace of mind. Wait for better mortgage rates/prices.
I am in DMV area as well, I was planning to buy this year as well hoping interest rates will come down, but looks like I am going to keep renting. Makes no sense to double your housing expense for similar place. Just look at your amortization rate during first few years, 90%+ of your mortgage goes towards interests. It’s freaking bonkers what 7+ interest rate does to monthly payment. It’s better to keep investing in index funds for next few years and then put a huge downpayment when rates come down. This is just my opinion though, good luck!
Nah