Buying a Condo in Seattle

[WhereDoesItHurt]

Hi everyone,

I am new to the forums (although have seen threads for a long time) and decided I needed to join in order to try and find some sound advice on my current financial situation. Yes, I have read all the threads about buying property here but I'm hoping someone could help me with the numbers I'm working with here (rounded off for math's sake).

I will be entering my first year this fall and will be living at home. I'll be taking out approximately 20k this year (tuition and books only), 25k each year after that and have roughly 70k in loans from undergrad in addition to some other loans (not credit related). I plan to get married next August with my fiancee who's living in a different state and working in a lab right now. She will be applying for PhD programs this upcoming year (MCB programs). If she gets into the program or not, she'll be making about the same income (stipend/salary) so that in addition to the 35k we have in savings is what we're working with. Now that we're engaged many "older" folks have told us to consider buying a condo so we're not "throwing away" our money.

Basically after doing all the math, I could either spend $86,000 at $1200/mo for 6 years (and yes, I know I am making a LARGE assumption by thinking I will stay in the same place for school AND residency) on an apartment with my fiancee. Or trying to "get back" that money by buying a condo (most likely will be in the 280-300k range for the area we want). Now it's feasible to pull it off if I max out my student loans leaving me about $300,000 in debt after it's all said and done (including undergrad, condo loans, and med school). We'll be able to make it by during residency (with both of our incomes combined) with about $10,000 surplus/yr. Now I guess my questions are:

1) Is it worth taking out all the loans and the risk of real estate (upcoming Seattle neighborhood - Eastlake) to get a condo and possibly make/get my investment back?

2) Is it better to co-sign with one of our (me or my fiancee's) parents? That way they can deduct the interest as well as maybe ease the interest rates on the mortgage?

Thanks!

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[drroberto]

Check out www.seattlebubble.com
You will find a lot of information there regarding the real estate situation in seattle. Seattle is just starting to slow down recently. I think in the past 4 months or so, prices have dropped on average 3-5%. Check out www.redfin.com and you will discover a lot of price reduction in listings. Seattle is no where near the bottom. Prices might drop 20-30% more in the next 3-5 years. If your condo costs $300000, that's around $60000-$90000 lost in equity, due to depreciation. Add into that the cost of housekeeping, HOA fees, PMI, insurance etc etc. Also, the interest you are paying in the first few years will be much more than the cost of renting. You will have a lot of debt going through medical school. It is just crazy to think that you might accrue $300000 in debt when you are ready to practice. Also, you might not get into residency in Seattle.
So, DON'T!!

 

[amakhosidlo]

Agreed.

I'm in about the same situation; I'm graduating soon and was actually looking at those new units on Eastlake (LOVED the view). I had the funds lined up, but I've walked away for the time being, primarily for the reason the previous poster mentioned. The Seattle market may be fairly well-insulated from the economic downturn, but it will impact eventually.

Another factor to consider is the available inventory in Seattle. Have you seen all the other new developments going up? I swear, everyone and their mother is buying up property and putting up townhomes/condos. It's a great short term investment, but unfortunately it carries the ramification of a sharply decreased overall demand.

Seattle's usually a great market, and I don't see it slumping for 5 years, but maybe give it a year and a half, then start looking.

 

[Mtloomis]

As far as the Macro market, most experts insist that the market is nearly bottomed out. It should begin a turn around within the next year, which would coincide the with the average 10 year cycle.

When you are looking at buying verses renting in any location the best way to start is to assume NO appreciation on your house. If you buy well this is unlikely, however if you worried at all it is better to be safe.

As to the appreciation, I'm not one of these people touting real estate as the best investment, it's not. But it is an appreciating asset. The law of supply and demand takes care of that. Every day the population goes up and other than Dubai no one is making any more land for those people to live on.

But, if you assume a flat line or even lost investment you give your math some cushion. What you should look at is money invested in the property and money lost.

Money invested is any money paid toward the principle. Money lost is, interest, PMI, HOA fees, taxes, insurance, upkeep,and Realtor fees when selling. There are online Calculators that will tell you how much of your payment over the years will go toward interest and how much toward principle. (you may be surprised at how little equity you are building in those first years). If those money lost items are more than rent for a comparable place then you are making a bad investment.

There is also a time frame aspect. It will on average take 4-5 years to build enough equity to make buying a better option than renting. For example you could pay $1200 in rent or $1200 on a mortgage. It will take you 4 years to build enough equity to cover your other buying costs such as closing expenses.

If in your case you are looking at either spending 1200 dollars in rent or 2500 dollars in mortgage it will take decades to cover that spread. Of course all these numbers ignore the utility factor.

My wife and I spend more on our house than we would to rent. However we love our home and wouldn't trade it for any apartment or rented house I've ever seen. Sometimes it's easy to look at housing in dollars and cents and forget that you have to live there. And that where you live makes a big difference in your emotional health as well.

Lastly all these comments assume that you are buying intelligently and won't buy into a situation where you lose money. And they assume that you are able to obtain financing for your anticipated purchases.

I do this for a living so if you have more questions PM me. It's always tough to give blanket statements to specific questions.