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Old 03-07-2018, 11:49 AM   #21
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I'd stay put. Starting out with a house that was much less expensive than what I could afford, and stashing as much as I could in Equity Index Funds in my 20s and 30s is what has allowed me to be FI today. Given the fact that the location of the new place isn't as good as the location of the old place, that would further cement my decision to stay put.
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Old 03-07-2018, 11:51 AM   #22
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I can still back out. I am under contract and have $1k earnest money into it, but my attorney advises that it would be recovered if we backed out (at this point). The longer I wait, the harder it is to back out.

If I back out now, I'd only be out the $375 inspection fee.

The neighborhood is in Uptown (for those who are familiar with Chicago). I currently live in Wrigleyville.

The unit in question has a large 900 square foot private deck that I really would enjoy. In addition to the new condo being a 2 bed/2 bath (current condo is 1 bed/1 bath), it also has a very large living area that would allow me to have a full size table and plenty of room to entertain/host guests. Current condo does not have much living space.

The additional bedroom would just be used as an office for now. Realistically, it would not get much use aside from when family comes to visit, which is only once or twice a year.

So for me, the main attractions are: the huge private roof top (having 900 square feet of private outdoor space in Chicago is a big rarity and would be awesome to effectively double my living space in the summer months) and the extra common area space (room for a full kitchen table, bigger couch, bar stools in kitchen). Added pluses are the 2nd bathroom and 2nd bedroom, although not as big of a selling point (at this point anyway) as the bigger common area space and private roof top.

the main cons are: higher living expenses and hassle of having to move/sell current place. other minor ones are extra space to clean and maintain.
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Old 03-07-2018, 11:58 AM   #23
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The neighborhood is in Uptown (for those who are familiar with Chicago). I currently live in Wrigleyville.
Yep, those neighborhoods were going to be my guess. PM if you have specific questions about Uptown, as I've been living there for about 12 years now. Also, I do think that it's a good neighborhood to be moving into, though at that price point it's probably a big place and/or new. Would be happy to grab a coffee and discuss the neighborhood.
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Old 03-07-2018, 12:01 PM   #24
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the main cons are: higher living expenses and hassle of having to move/sell current place. other minor ones are extra space to clean and maintain.
If those are indeed your only reservations, I'd say go ahead. They are generic costs of moving to any larger accommodation.

As your current condo is a bit small, you will probably be moving sooner or later. As you've found a new place that you love, might as well do it now and maximize your benefit/enjoyment.
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STATS:
Age: 29
Taxable investments: $181k
Retirement Accts: $183k
Cash Savings: $88k
Current Home Equity: $60k (this is net of realtor fees, mortgage pay off, closing costs, etc). Note, I only put $40k into my condo when I bought it, so I've gained about $20k from market appreciation.

NET: $512k

I would put 20% down, so the cash to close amount on the new place would come out to about $75k-$80k. This would bring my NW to $432k after it's all said and done.


If you take cash and put it into a condo (or other asset), your balance sheet entries change but your net worth remains essentially the same. It's not like the 20% down just disappears into a black hole.
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Old 03-07-2018, 12:14 PM   #25
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If those are indeed your only reservations, I'd say go ahead. They are generic costs of moving to any larger accommodation.

As your current condo is a bit small, you will probably be moving sooner or later. As you've found a new place that you love, might as well do it now and maximize your benefit/enjoyment.


If you take cash and put it into a condo (or other asset), your balance sheet entries change but your net worth remains essentially the same. It's not like the 20% down just disappears into a black hole.
Balance sheet stays mostly the same due to sale of current condo. Technically it will decrease a bit, but essentially I am putting $75k into new condo and selling current condo and cashing out $60-65k. So B/S will decrease by about $15k.
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Old 03-07-2018, 01:08 PM   #26
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I wouldn’t because chances are you will move again in 5-6 years (if you plan to have kids). Not many moms are happy (or stay happy) raising kids with no yard and so much stairs (and less playmates or other services). If y’all don’t want kids, ask her opinion and weigh it 10-25% based on your relationship. The rest is up to your personal preferences. Outdoor space is nice when someone else sweeps it and keeps it clean. If you go out only on the weekends be prepared to clean before you use it almost every week.
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Old 03-07-2018, 01:13 PM   #27
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Also, the location is actually slightly worse than where I live right now. It's only 8 blocks from my current condo (1 mile exactly), but in a totally different neighborhood. The area is still 'gentrifying'. It is not a horrible area, but definitely not as desirable as where I live now. It is close to the train and the lake still, which are big pluses for me.

I basically would be giving up my more desirable location now for more space and a nicer condo. I realized that the type of condo I want in my current location would be $500-$600k. It's kind of crazy that an 8 block radius can have that much of an impact on values, but that's city living for you.


So the compromise for me to purchase in the gentrifying neighborhood.......

Or do I stay ka-put.....
I hope you mean stay put, and not stay kaput.

In any case, buying in a gentrifying neighborhood has opportunity and also risk, and the risks may be beyond market risk. 5 years ago I moved about the same distance that you are describing, 8 blocks, into a completely different social environment. That was at the bottom of the mortgage caused real estate crash.Since then, my condo has almost tripled in Redfin estimates, and the sales in my building are always fast and much higher priced than I would have expected But for long time I heard plenty of police sirens, and there were a few murders within 3 blocks or so. There were very few heterosexual couples in the building, and few single women either. Since then a group of townhouses next door are mostly populated by young families, some students, and an apparently dedicated AirBnB operation. The units in my building are likely too small for an American idea of where to raise children, but the whole scene is much less worrisome to people who are not used to crap neighborhoods. In fact, I think in most eyes it has effectively merged with the formerly more expensive adjacent neighborhoods. In my eyes, if a place has bones, good micro-location for big demand well paying jobs, and is in a very rapidly improving city economy, to avoid what is called gentrification the push back has to be more hostile and effective than it usually is.

So a case can be made for whatever you are attracted to, of the situations you have mentioned.

Must say, Chicago is different enough from Seattle to make me wonder about how well these ideas might fit you situation..

Ha
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Old 03-07-2018, 01:16 PM   #28
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Wow! Two totally incorrect statements within just 8 words.

Mortgages and CCs have their place, and are valuable to those who want to use them. Just because you don't like them doesn't make them bad.
+1!!!!
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Old 03-07-2018, 01:28 PM   #29
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Currently dating but my SO and I have no plans to move -in together in the near future, although I would be open to it but not for another 1.5-2 years.
Are you sure you aren't "nesting"?
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Old 03-07-2018, 01:31 PM   #30
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Real estate is all about location, location, location. Personally, I would stay where you are.
Reinforcing this message above. At 29, I would be staying put and saving for the future if (and when) your life changes. Moving to a less desirable area for another bedroom is not wise.
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Old 03-07-2018, 01:57 PM   #31
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I'd stay put! I've been in that position in the Washington, D.C. Area.

Bank the 18k in your 401k prior to doing anything else. Wait and see what direction you and your partner take.

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Old 03-07-2018, 04:17 PM   #32
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Sounds like you are committed. If so, I'm unsure why you're now seeking advice or input: the decision has already been made.
Exactly what I was thinking. Not the time to be thinking about it once you are under contract.
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Old 03-07-2018, 04:27 PM   #33
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I would consider the advice on the true costs of moving to a new location and the amount of time you would need to stay to make much profit. 10 years is what I have heard before committing to a house/condo. 3 years from now you might have a spouse and new direction for where you want to live/work.
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Old 03-07-2018, 04:29 PM   #34
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There are times when it is better the devil you know than the devil you don't know. You know the condition of the condo that you are in right now (common elements, reserves, maintenance needs), you don't know the other building as intimately. Stay put. Sell if get married.

One advantage of a one bedroom is that you don't buy as much stuff, that alone will save you money. If you marry much of the furnishings you have now won't go into the marital home. There is more than the cash flow to consider.
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Old 03-07-2018, 04:33 PM   #35
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I would go with the new digs. It will improve your quality of life, a 2/2 will be more marketable if you later decide to sell and from what you wrote it sounds like neighborhood has better appreciation potential. All this assumes that you plan to stay there 5 years or more.

Have you considered keeping your current 1/1 as a rental unit?
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Old 03-07-2018, 05:01 PM   #36
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You had me at 900 sq ft private rooftop deck, but gentrifying neighborhood is another plus, as the earlier you buy in the better your appreciation is likely to be. I’m no expert, but in my experience, once a neighborhood in Chicago gets identified as up and coming it doesn’t turn back.
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Old 03-07-2018, 05:09 PM   #37
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"The new place is desirable because it gives me more room and is more realistic for a long term residence."

You are tying up a lot of money and taking on serious debt for "more room" and the possiblity of a future long term residence. (Any chance you might move in the next few years: new job, transfer, marriage?)

Take the emotion out of it ("new place-more room"). Housing is just shelter. Obviously, a nicer place is, well, "nice". But you don't NEED it. It is a "want"

Run the numbers and look how much better off you would be 5 and 10 years out if you just stay put and continue to invest the difference. I am sure you are familiar with compound interest-but the concept explodes upward the more you invest in the early years. When you are 50-something, miserable at your career, and wanting to RE, will you look back and wish you had saved more when it was possible, like now? Most likely, yes.

(Also, if you are a fan of Mr. Money Mustache, what advice do you think he would give? I think you know.)

BTW, I might be inclined to think differently if you were getting a terrific deal on the new place (like the repo you now own). But a great deal was never part of your discussion.

Congrats on the great financial decisions you have made so far. BtB
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Old 03-07-2018, 05:15 PM   #38
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Uptown has been gentrifying for a while. Have you been looking for a two bedroom or did this particular opportunity sort of appear and intrigue you? If the latter, keep looking?

A young friend has a two/two and from day one has rented out the second bedroom and bath, even after his girlfriend moved in . So that's a possibility.
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Old 03-07-2018, 09:14 PM   #39
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The wife got bored 2 years ago, and started looking for large foreclosures. We ended up with 5 bedrooms and 5 full baths for 25% below appraised value. And houses on our street go up to 10,500 square feet.

Have you searched if there are any area foreclosures in decent shape?
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Old 03-08-2018, 01:34 AM   #40
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Real estate is all about location, location, location. Personally, I would stay where you are.


+1 - if your current condo is in a much better location, it has better appreciation potential. Also how would you feel if you bought the new place and the area didn’t fully “gentrify”? Some friends of ours had that happen and ended up selling the place at a loss just to get out.
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