Housing Advice

[frgo0629]

Looking for an opinion on my housing situation and choice we will have to make < 3 months.

Married (33 & 32 yrs old) w/ 2 young kids. Gross $140k w/ no personal debt.

1.Currently rent a condo from employer that is 10 yrs old. More than a Adequate size but is a condo and lacking in a yard. Relatively new with no updates needed. Located in the community we both work in. Most likely not our “forever home” or what we envisioned. Have the option to purchase for $130k which is generous as neighboring unit sold for $235k < 18 months ago.

2. Family member wants to sell their property to us in 1.5 yrs but wants commitment soon or will move forward with renovations to sell on open market. House on 5 acres in rural setting with outbuildings yet close to ammenities that is probably larger than we need but would consider more of our “forever home”. 10 miles from work. Would require the purchase of machinery for snow/mowing($10-$15k). House is easily livable today but would prefer some renovations in coming yrs. Price sounds like it will be $360k-$380k with open market value of $390k-$415k. Significant other really prefers option 2 (family property) and maybe upset that employer would offer such a generous deal.

We’ve been fortunate and to date in a decent spot with NW around $680k. The conservative in me says option 1 is a no brainer. I wouldn’t sell this in less than 5 yrs or longer as I wouldn’t want to have that conversation w/ employer. Option 2 is probably the personal choice giving no financial consideration however have a fear of being house poor and committed to a much larger payment as we’ve largely lived our adult lives with no personal debt. Also other expenses that come with larger property. 20% down is a non issue for either but also don’t want to hurt our trajectory.

Any words of wisdom out there? Realize it’s a personal choice but what would you do? Live a little? Regret having larger pmt?

 

[wrigley]

Can you buy both? You already have 100k in equity in the condo. Live in it for another 3 years and build even more equity, then sell (capital gains tax free) and apply that money to the other property. Sound like you're in a pretty good situation. Just a thought.

 

[pb4uski]

That's what I was thinking. Buy both and rent the house for a few years while living in the condo so the employer doesn't get irritated... then move into the house and rent or sell the condo.

Another thought that crossed my mind is that if the employer is selling the condo to you below market by so much the IRS might consider the difference to be imputed income to you and taxable.

If your employer sells you property or services at a discount, you may be able to exclude the amount of the discount from your income. The exclusion applies to discounts on property or services offered to customers in the ordinary course of the line of business in which you work. However, it doesn’t apply to discounts on real property or property commonly held for investment (such as stocks or bonds).

 

[jkern]

Purchasing a $360K to $380K home with $140K income doesn't sound like house poor to me. I don't know what the property taxes are in your area, but with the current interest rates your mortgage would only be about $1200 per month.

 

[HarveyS]

Which option has the best schools?
Also, it's not just about larger payment. In my experience, a home requires much more time for yardwork, upkeep, etc. compared to a condo. Many weekends will be spent on house chores. Nothing wrong with that, just be aware of it.

 

[ivinsfan]

I don't understand your comment about your wife not being happy your employer offered such a generous discount. Does it come with golden handcuffs? If you are worth that much money to them, why don't you just ask for a raise?

It doesn't make sense that your company will go so far below market.

It seems as though if you had to pay retail for that condo, you would not buy it.

You haven't really provided enough details here.

 

[Dash man]

Happy wife, happy life!

 

[JRon]

If only purchasing one property, get the condo. Live in it for a few years and then sell for a profit using that to help purchase your forever home.

If you can swing buying both and the house will rent out and pay it's bills, that's a great option as you can renovate and move there in a few years and make some extra cash on the sale of the condo to boot.

 

[OldShooter]

Our first house was a duplex that launched me for 20+ years of landlording and profiting. Given your very sensible financial attitude, that might be a better opportunity than what you are now focused on through pure chance. Plan to keep it until the kids get bigger, then either sell it or keep in as the first property in your empire and buy something bigger.

Given kids you should also consider school districts for your two current interests.

 

[cathy63]

I also like the option of buying both properties and renting out the house. Just make sure the family member who sells it to you is aware of your plans. They may see the discount from fair market value as a gift to your growing family, and have an expectation that you'll live it it ... not that they should have such expectations, but people are not always rational and you probably want to maintain a harmonious relationship with this person.

Also, tell us more about your employer. Why are they willing to sell you a condo at so much less than market value? And why would there be any special conversation required if you did decide to sell it in 1.5 years when the house becomes available? If there is a conversation, why can't you just say "we have this great opportunity to buy a house from a family member, so we're going to be selling the condo"? You don't have to tell them that you knew you'd be purchasing the house when you bought the condo. How would they feel if you move to the house in 1.5 years and rent out the condo?

 

[frgo0629]

As far as school they would go to district where we currently live as of now, although either are fine.

I’d feel obligated to that the conversation of selling due to the generous purchase price. Employer is aware of other property as we’ve been on and off discussing us buying employer property for past few yrs however made mention of what we are considering and that is when employer decided to come up with price.

Why the low purchase? Employer Families been made 100 times over, older, and probably just a drop in the bucket to them and most likely don’t want to deal with selling on market.

I probably wouldn’t purchase said condo for market value at this stage of life as we’re in a spot to make that next move up. Although employer has had a hand in this due to benefits of living here the past 9 yrs.
It is compelling to own both but morally feel like each sellers intentions are for primary residence and both parties play a significant role in our lives.

 

[ivinsfan]

As far as school they would go to district where we currently live as of now, although either are fine.

I’d feel obligated to that the conversation of selling due to the generous purchase price. Employer is aware of other property as we’ve been on and off discussing us buying employer property for past few yrs however made mention of what we are considering and that is when employer decided to come up with price.

Why the low purchase? Employer Families been made 100 times over, older, and probably just a drop in the bucket to them and most likely don’t want to deal with selling on market.

I probably wouldn’t purchase said condo for market value at this stage of life as we’re in a spot to make that next move up. Although employer has had a hand in this due to benefits of living here the past 9 yrs.
It is compelling to own both but morally feel like each sellers intentions are for primary residence and both parties play a significant role in our lives.

The only people you owe anything to are the family you live with. You are too old to get bogged down with these phantom obligations.

 

[pb4uski]

How about you tell employer that you would like to buy but that it is possible that you may move into the other place in a couple years and if you did you would plan to either rent or sell the condo. Do you think that would be acceptable to them? It will still give them a quick and easy exit and not have to deal with a market sale.

If so, then tell the family member that you would like to buy their place when they are ready to sell.

If that works you would be having your cake and eating it too.

 

[Aerides]

Current home: rented from employer, option to buy for a "great deal"

Future home: Family "wants" to sell it to you, on their terms and timeline

How about option 3 - one that you and your wife go out and pick, without any emotional baggage or obligations, or bad feelings if and when something comes up later on?

You're in a great financial position for your age. Go shopping.

 

[travelover]

I'd go for the place the wife and kids want and not let money guide me. Their happiness is paramount and is also a financial consideration if you get on the wrong side of your DW, which seems to happen to others with regularity. Your kids will have a blast on 5 acres as opposed to living in a condo.

Also, you don't need to spend $15K to buy a mower / snow removal machine. Consider reducing the mowed area if a lot of the 5 acres is mowed now.

 

[aaronc879]

I think maintaining a large homestead with two people working full time and raising two young kids would be waaaaaay too much work. Take the good condo deal, increase your net worth, then in 15 years retire early and buy a home on several acres if you want to.

 

[rodi]

How about you tell employer that you would like to buy but that it is possible that you may move into the other place in a couple years and if you did you would plan to either rent or sell the condo. Do you think that would be acceptable to them? It will still give them a quick and easy exit and not have to deal with a market sale.

If so, then tell the family member that you would like to buy their place when they are ready to sell.

If that works you would be having your cake and eating it too.

This would be my first choice - talk to the boss and find out if they'd be upset if you sold or rented it out in a few years.

Current home: rented from employer, option to buy for a "great deal"

Future home: Family "wants" to sell it to you, on their terms and timeline

How about option 3 - one that you and your wife go out and pick, without any emotional baggage or obligations, or bad feelings if and when something comes up later on?

You're in a great financial position for your age. Go shopping.

This is my second choice...

And I tend to agree with aaron also - the bigger house will be a lot more work for two working parents with small kids.

 

[ivinsfan]

How about you tell employer that you would like to buy but that it is possible that you may move into the other place in a couple years and if you did you would plan to either rent or sell the condo. Do you think that would be acceptable to them? It will still give them a quick and easy exit and not have to deal with a market sale.

If so, then tell the family member that you would like to buy their place when they are ready to sell.

If that works you would be having your cake and eating it too.

I don't understand why OP is tying this together. I wouldn't buy a condo for any reason if I thought the person I bought it from would be annoyed if I sold it.

I don't buy the OP saying his company doesn't need money and can eat 100K of equity because they like him. The question is will it be a "regular" mortgage or will he be making the payments to his company.

 

[pb4uski]

The reason I tie in the exit strategy is because from what the OP has said it is hard to know the employer's reasons for the sweetheart deal and expectations.

It could be as simple as the employer is rich and selling to the OP below market is a quick and easy exit and they are rich enough that they don't care about leaving ~$100k on the table... in which case they may not care what the OP does with the condo.

OTOH, the employer may be viewing it as giving as giving a valued employee a sweetheart deal to incentivize loyalty to the employer and they might be upset if the OP rents or sells it in a couple years.

I'm not sure if the OP knows for sure... and if he doesn't know then he should ask to avoid inadvertently spoiling his relationship with his employer.

 

[frgo0629]

Thanks for all the input.

My intentions now are similar to what pb4uski mentioned. Be upfront that if purchased I very well may sell in coming years and if not okay we will not buy.

At this moment I don’t really know where employer stands if I were to sell in short time frame. I’ll be finding that out.
If bought it would be a mortgage and not a contract for deed via employer.

 

[Music Lover]

I think maintaining a large homestead with two people working full time and raising two young kids would be waaaaaay too much work. Take the good condo deal, increase your net worth, then in 15 years retire early and buy a home on several acres if you want to.

If I was younger and had the opportunity to buy my forever home on acreage I would have done so. Improvements and updates can be done over time and raising kids on several acres of land sure beats living in a cramped condo.

That being said, if you buy acreage you better be fully aware of the amount of work that has to be done. It's a lifestyle and not for everyone.

 

[troutnut1]

Condos always involve much more than the “unit”. You are also buying an undivided interest in the entire project. That can come with special surprises. Are there any current or upcoming lawsuits? How is the associations budget? Are there adequate reserves for upcoming maintenance like painting, roofing, siding, carport repair, etc.? Is there a history of “special assessments”? Are the current dues adequate or do they need to be increased? Are the board members stable? Have you looked at the last few years newsletters? Is it well maintained and is it being cared for well? Do they have policies which would restrict you from making it a traditional rental or vacation rental?

I have lived both ways. I started in condos when I was young and graduated to horse property in Montana. With all the maintenance, snow removal, etc. or our place sometimes I wish I was back in the condos. Maybe I’ll have to when we can no longer care for the acreage. Condos make great rentals provided the HOA allows it. You never have to worry about the lawn, the roof, exterior painting, etc. BUT there are horror stories everywhere about HOA’s gone bad. And most of them have problems with rentals because of rules on the secondary market for mortgages that are reluctant to hold mortgages in projects that are mostly non-owner occupied. And I expect this to get worse with the sudden craze of airbnbs and short term rentals.

 

[Finance Dave]

I'd rent the condo for 6-12 months to make sure you like it, then buy it if you do ON A 15 YEAR FIXED loan. Pass up on the other house, sounds like too much work and too far from jobs. Join something like a swim club for the kids since little play area....or spend the money on hobbies for them like dance, cheer, karate, etc.

You don't say how secure your job is...is there any chance you'd be laid off? What about the company asking you to relocate? If so, maybe rent even longer...getting a mortgage doesn't pay unless you stay quite awhile...I'd say at LEAST 5 years....due to the amortization schedule...you pay mostly interest in the beginning. Although in this case you'd have $100k immediate equity...so that might negate the above thinking.

P.S. If you get a 15 year loan as mentioned, the equity buildup is much faster than with a 30 year.

 

[jollystomper]

Any words of wisdom out there? Realize it’s a personal choice but what would you do? Live a little? Regret having larger pmt?

I would make this more of a "what kind of lifestyle do I want" choice. I was not born with the landlord gene , so I would not try to buy both properties.


We had a similar situation when we moved into our current area - buy a house well within our budget range, or stretch for a house at the very top of our budget range (actually higher but due to market and personal conditions the seller accepted our offer) but was 50% larger inside, more than twice the land outside (not 5 acres, but over an acre, much more land than we ever had) and was the type of house we dreamed of having. We had young kids 5 and under at the time. We made the choice based on the lifestyle we wanted to have with our children. We shied away from condos, though they were cheaper, because it gave us more freedom from an noise and privacy standpoint.


I agree with others to look at how much time and money you would have to spend for basic maintenance of the larger property. A simple example, I went from 20 minutes of push mowing to either 3 hours of push mowing or 1.5 hours of riding mowing, with money and maintenance for a riding mower. That is just one of many things. However... even back then, being able to sit in the evening in our large living room and look out thru the picture window over farmland and mountains in the distance was well worth it. As always, YMMV.

 

[smihaila]

OP, do you enjoy communism, HOAs, condo fees and other monthly "fees" in perpetuity (and always increasing)? If the answer is yes, then go for the condo