To Buy Or Not To Buy Real Estate- That Is The Question

I have a very important decision to make. That is, to buy or not to buy? Also, if I buy, how expensive of a real estate do I want to buy? Not only is that a very difficult decision, but I plan on making that decision in the next 2-3 months! Ha!

This post will delve into my my thought process as to the factors I am considering before finalizing my decision. Much like personal finance, the decision to invest in real estate is a personal one and there’s never one approach that fits everyone. So this post will be highly personal to me. However, I hope that sharing my thoughts will be of value to you. Also, if you’re up for it, feel free to let me know what you think I should do in the comment section. Fair warning: This is going to be a long post. So, without further adieu, let’s dive in to see if I should buy or not buy.

1. Should I Buy Real Estate Or Move In With My Mom?

The initial decision I have to make is where I want to live. In a nutshell, I will be moving from my current location to the state where my mom lives. I have two primary options: I could live with my mom or I could rent or buy a place that is close by.

I love my mom and moving back to live with my mom would make a LOT of sense. Also, I wouldn’t have to pay rent and so I really wouldn’t have a financial burden. Of course, I would still try to help my mom financially, but not having to pay rent or a mortgage would be nice.

Additionally, due to my health concerns, moving back home would allow my mom to take care of me if anything should happen to me, and vice versa. So there are many benefits. However, there are downsides as well.

I like the idea of freedom. If I want to have friends over, or bring home someone I am dating, I wouldn’t have to worry about it if I was at my own place. Additionally, my mom is a bit more religious than I am and she observes the Sabbath. So, if I was under her roof, I would have to follow the house rules such as no laundry on the Sabbath. It’s a minor nuisance, but I’d rather be able to follow my own rules.

So, after careful consideration of the above, I am leaning towards NOT living with my mom, but rather living close by so that I can visit whenever it’s convenient. She can also visit me whenever it’s convenient. I am looking at places that are around 40 minutes drive from where my mom lives.

2. Should I Rent Or Buy Real Estate?

The next decision I have to make is whether I should buy or rent real estate in a location that is close to my mom. As with all decisions, there are pros and cons to each.

Renting has its benefits. The cash outlay to rent a place is MUCH lower than if I were to buy. There wouldn’t be a down payment or closing costs to worry about. Additionally, it’s easier to leave a rental than it is to walk away from a mortgage (Not that I would do that). But, if I don’t like the place I am renting, I can just wait until after the lease is up and get out after a year. With a mortgage, I am more stuck, and while there are options to get out of the mortgage, they are also expensive and sometimes come with risk. So, renting is easier for sure.

Of course, renting feels like I am just throwing money away. Once I pay rent, I am never getting any of that money back. I am not building equity or otherwise investing. There is a time and place for renting and it depends on the circumstances. If my health takes a turn for the worst (in the next 2 months), then I might seriously consider renting instead of buying. But right now, I am leaning towards buying.

Why Buy Real Estate?

There are several reasons why I am leaning towards buying real estate. With buying, I am investing for the future. Paying a mortgage is like a forced savings plan. I am building equity. Also, if and when I pass away (which is a very possible (if not likely) outcome based on my last results), I can leave the real estate to my family. Or I can sell if need be, beforehand.

Additionally, I don’t like the fact that if I rent, the landlord can jack up the rental price or otherwise not renew the lease at the end of the lease term. So, I prefer a bit more stability rather than having to worry about future cost increases or economic downtown or inflation or anything of the sort.

Finally, because my health could take a turn for the worse at any moment, a part of me wants to live life to the fullest as much as I can. Part of that calculus is to be as comfortable as I can. That might mean buying the most expensive condo I can and then just be done with real estate. But regardless, I am leaning towards buying instead of renting.

3. Should I Buy A Cheap Condo Or An Expensive Condo?

Although I didn’t get into it, I’ve decided that, if I buy, I am going to purchase a condo over a single family residence. Long-story-short, I don’t want to have to take care of any lawn care or anything like that. I also would like to be in a place with amenities such as a pool and gym and have other people (namely the HOA) be responsible for its upkeep.

So, the question therefore becomes, should I buy a really expensive condo (think penthouse corner unit in a high rise) or a really cheap one. Let’s discuss.

A. Buying An Expensive Condo

I am leaning towards buying the most expensive condo I can (within reason). In order to do this, I would stretch my budget.

Unfortunately, I have enough money to only do this once. So, I would have to cash out my retirement accounts (less any amount for taxes and penalties) to be able to buy the condo. My thought process is simple. I can’t take the money with me when I die. I don’t have any wife or kids to leave the money to. So, why not use it to enjoy life?

Another consideration of mine is that instead of buying an expensive condo to live in, I would take that money and invest it into another beach condo. This is a very tempting option!!! If I did this option, I would definitely move in to live with my mom (or get a really cheap place to rent). But the beach condo could potentially be used to generate income, which I may need in the future.

I have applied at banks to see how much money I can get and to see if I even qualify to purchase a beach condo. The interest rate is super high for a beach condo (9%), and is overall far more expensive than a primary residence (around 6%). So, this may all be academic because I don’t know if I am going to qualify for the beach condo.

Finally, I may want to preserve the option of buying another beach condo in the future and so if I get an expensive condo now to live in, I won’t be able to buy a beach condo later. Decisions, decisions.

The overall price range I am looking at for an expensive condo (either to live in or as a beach condo) is 500-600k.

B. Buying A Cheap Condo

Buying a cheap condo in the range of 170-250k makes a lot of financial sense. It would allow me to still be close to my mom and it would not stretch my budget at all. Moreover, I may even be able to get an expensive condo later, because the initial cash outlay would not be as high.

Of course, there are down sides. In looking at the market, the cheap condos would either be a studio or 1-bedroom place. I was hoping for at least 2 bedroom for friends or family when they visit. Also, a 2-bedroom would give me the option to have a roommate who would help pay for the mortgage. It’s very tempting but no choice is perfect.

Also, the cheaper condos are not as nice and they don’t come with as great a view (for the most part) as the expensive condos – there are of course exceptions.

Purchasing a cheap condo would also give me some amount of flexibility. I would be able to live in the area that I want to live (in downtown – so walkability factor is over 90%), and still be close to my mom. It’s just that the place won’t look as nice. If my health turns for the worse, I might regret not living in a nicer place. But, if my health stays the same or improves, I could potentially look into getting an expensive condo at the beach later. In this scenario, if I buy cheap condo downtown, I won’t buy another condo downtown because I am already there.

Finally, I should point out that renting a nicer condo, instead of purchasing a cheap condo, would give me all the same benefits, but add greater flexibility to my situation.

C. Major Constraint: Rental Restrictions

One of the biggest constraints I have when deciding how expensive a condo to buy are rental restrictions. Most of the condos have rental restrictions such that I couldn’t just buy the condo and then rent it out. The nice condos have sometimes 3-5 years of a waiting list before you can rent out the condo. Technically, this shouldn’t be a problem for me because I will be living there, likely for the rest of my life (note: I can have roommates). But, I like having flexibility.

What if I buy an expensive condo downtown and I don’t like living there for whatever reason? Or what if life happens again and I have to move? I don’t want to be stuck with paying a mortgage in a unit that I can’t rent out. Condo HOAs sometimes have hardship clauses but I don’t know if I want to be dependent on that.

D. Major Constraint: Short-Term Rentals

Another big constraint is that most condos downtown (unlike the condos at the beach) don’t allow for short-term rentals such as Airbnb and VRBO. A very small number of the condos in my target market have no rental restrictions and allow for short-term rentals, but they are not the nicest condos. They are smaller, have poor views, and not the greatest of locations – although being downtown means they are centrally located.

So, another decision I have to make is whether to buy a condo downtown in a not-so-nice building that allows for short-term rentals and have no rental restrictions or buy in a nicer building with nicer amenities, but with the constraint of having rental restrictions and no opportunity to do short-term rentals.

Decisions, decisions!

I wish I could tell you which way I am leaning, but I truthfully go back-and-forth on this one every day. I am hoping that once I start condo shopping and I can take a look at the units for myself, it may help me decide one way or the other. There is also the distinct possibility of me just renting instead of buying, but we will see.

E. Major Constraint: Self-Imposed Time Restriction

One major constraint is a self-imposed deadline. I have to relocate for my job and I want to buy a place before I relocate. I could wait to get more familiar with the area, but I choose not to. I’ve already narrowed down the location I want to be in, namely downtown (or midtown). I’ve also narrowed down the type of property I want (namely condo over a single family home). The final issue for me is time. I need to do this in 2-3 months, since that’s the time I will be relocating.

Without getting into too much details, I own the house I am currently living in. In order for my current primary residence to not count against me for the next property I buy, I have to sell or rent out my primary residence. I talked to both a realtor and a property manager and each is confident they could sell or rent out my home in the timeline required.

I chose to rent out my current home to give me more flexibility. In other words, I can always sell my house later, but once sold, I can’t rent it out after. There is more to it than that, but that’s good for now.

So fingers crossed that all the stars will align in time. That is, fingers crossed that I can find a tenant in 2-3 months, and find and close on the condo that meets my needs before I relocate.

Before I make that ultimate decision, I will received an update on my health (am I getting better or worse) and that will help influence what I decide to do in the future.

Final Thoughts

Arguably, given the uncertainty of the future, the safer approach would be for me to rent for a year and then make a decision after that about purchasing a home. But I have to decide if I want to live as if I am going to die soon or live as if I am going to have a longer life. I love real estate and the prospect of making another purchase (even if it means cashing out both of my retirement accounts), is very appealing to me. It gives me something to look forward to.

If I buy another beach condo, it gives me a project to focus on: namely bringing value to my guests.

Even if I use all the funds in my retirement accounts to buy an expensive property, that would still be ok because, in a way, I am simply transferring money from one asset class to the another. It’s not like I am withdrawing the funds to go travel the world or purchase frivolous things. Given the distinct possibility I may not live to see retirement age, then I might as well use the money now on something that provides value to me.

Finally, whatever decision I make, I can take comfort in the fact that my mom, who is listed as my sole beneficiary, will be well taken care of with my life insurance policy should anything ever happen to me.

In any case, I have a very important decision to make and a very short period of time to make the decision. To coin a phrase from Hunger Games, I hope that the odds will be ever in my favor.

What did you think of this post? What do you think I should do?

Let me know your thoughts by commenting below.