Figuring out what is best to do...

[Project84]

I was tossing the idea around of buying a Yaris sedan 5sp a while back, but then because of another idea, I put that on hold. The "other idea" is buying a house. Well, now I'm starting to get cold feet about that, but I'm still a renter and throwing away my money each month on $650 rent!! Yikes! I also have no garage and no where to put all my toys (shop equipment, welder, tool chests, air compressor) except in my basement where none of it gets used.

So. I'm indecisive. I want to do what is best for me LONG term. Like the rest of you, I'm ate up with MPG thoughts, so much so that my SCCA race car is sitting this season out because I don't want that interrupting my focus (or adding to my expenses) on impriving MPG and my way of life.

How is the economy related to buying a house? I mean, let me just tell you, I'm 22 years old, self sufficient, but I don't have all the "real-world experience" that I might need in deciding on bigger topics like this, because I just simply don't know enough about it.

Where I'm at in my life is:

I have a chunk of money saved up, we'll call it "X". I planned on saving until I had X in the bank, then finding a home. My daily driver gets roughly what you see, 25mpg average w/ lite mods, more planned. I only drive about 9k miles per year so my fuel expense isn't much really right now. Would you guide me to lean more towards shopping for a house, or taking that X that I have saved, and buying a more fuel efficient and reliable car. My DD is the '96 Saturn w/ 139k on the odo. and showing lots of signs of maintenance needed. Shocks/struts, springs, rear suspension rust/torn bushings, valve noise from engine, oil consumption (getting past rings) is a quart every 400 miles.

What would be the best compromise? Buying a newer but USED car that gets better FE? Like finding a used Echo (sibling to the Yaris) or Honda? Then save back to to hit X again and THEN look for a house?

This is just a scary-huge decision I'm on the verge of. At 22 I'm unaware if I'm ready to be a homeowner, but I know after living on my own now for 3 years that I'm ready to stop wasting money on rent, and I have a secure job that I'm semi-happy with and I'm in college part time trying to better myself.

Sorry for such a big post... just feeling a bit of stress and wanting to ask kindly for some helpful input from good people like yourselves. I'd ask the same question over at my F-Body forum (Camaro/Firebird enthusiasts) but I'd get flamed beyond belief!

-John

[Project84]

quick math for comparison.

I drive 9k miles per year.

at 26mpg average in my Saturn, I'm gonn hope fuel costs average out to $3.69 in '08 which makes it $1,277 spent on fuel.

at 35mpg it would cost $948, at 40mpg it would cost $830.... so even at $830 I'm only gonna be saving $370 per year for what will initially have a much higher cost than what my Saturn did, probably 6x the buying expense over what I have totally invested in my Saturn; purchase price was only $500, I've only got roughly $700 tied up in it w/ maintenance parts, but probably need to spend another $700.

So, depending on some other opinions, I think i've just realized that I don't necessarily need to buy a newer FE car, as it wouldn't save me all the much money (for now anyway) and I could probably afford to put that idea off for another year.

...told you I'm indecisive. lol

[R.I.D.E.]

The housing market is scary right now and I own mine outright, Our property taxes and insurance alone equal 5 months of your rent and we have no mortgage.

I would grab a nice Echo, and wait until the election in November is over while rebuilding your capital.

In the meantime look at whats available in local home sales. What you want is a fixer upper that you can buy cheap. An estate or desperate homeowner, or a foreclosure. Buy the worst house in a nice neighborhood and do a fairly significant renovation using your own labor. You can live in it while you fix it up using that energy to create equity instead of keeping the tired Saturn going.

The IRS rules state that you can make up to $250,000 in profit in home equity improvements every 730 days with no tax liability whatsoever.
I started at 50, wish I had done it at 22!

Instead of fixing up an older home I built two new ones from scratch. I took me 16 months on the first one and I made $165,000 free and clear with not a penny in taxes.

As long as the home market gets stable sometime in the future you could "flip" quite a few in the next 30 years. If the market stays in its present shape you can at least live in your project home.

Even in todays local market I made more money in 32 months building two houses than I made in 12 years working on cars.

Locally houses sell for $150+ per square foot, do diligent research and be willing to learn all you can about doing the work yourself.

I wouldn't worry about renting until 2009 when you can see what the political situation becomes. Remember you get a standard deduction on taxes without spending anything.

regards
gary

[Project84]

yeah I got the standard deduction last year at something like $5,600, but since I had nothing real to claim, I had to take that and hope for the best. This year, I've moved higher in my company, make more money, and fear I'll get taxed higher because of it and still only have that standard deduction. $650 in rent per month comes out to $7,800 per year that I'm "wasting".

I do maintenance for a living, so I'm not really afraid of a fixer-upper as that's my day to day. There are homes in my area under $100k that are readily available, foreclosures are harder to find though.

My Dad seems to think I'd be better at flipping cars (buy, fix, sell for profit) than investing in a home right now. I'd agree if it wasn't for one thing, I don't have a garage to work on project cars in!! lol

It's all pretty confusing to me. A big part of me wants to buy a house just so I have some equity and I'm not wasting $7,800 a year, but man, the other part of me is so scared to get into such a big purchase.

I'm single too, so I have no one else to rely on but myself, which adds to the fear of a $100k purchase.

[fumesucker]

I don't think the real estate market is near bottoming out yet..

My brother follows financial news very closely and he tells me the subprime mess is just the beginning of a housing meltdown.. There are more unoccupied homes now than there have been in decades..

If you are mechanically skilled, don't buy a newish car, buy something like an old Metro with the 3 cylinder and fix/drive it and then roll it over and buy another.. High efficiency cars are going to appreciate in value the higher gas goes..

I have a basement shop full of motorcycles that I'm waiting as long as possible to sell.. Motorcycle and scooter dealers are seeing a brisk business right now and I intend to cash in on my fuel efficient transportation that I've invested in over the last six months or so.. I buy older bikes that need some TLC and then turn around and sell them..

[Project84]

I could probably mod the heck out of the Saturn and turn it into the Frankensaturn or something and achieve 35mpg average w/ the DOHC and auto... but like I said, total investment, including purchase price, I only have about $1,200 in the Saturn and the A/C even works (although I don't use it but once a month) and I only drive about 9k mi. per year.

Maybe I should just do neither, an turn X that I have saved into X+x while I save more?

I guess I've just realized I want a house and its more practical and beneficial than a more FE vehicle.... now I just need to time it right and find the right place!!!

I'm going to talk w/ my bank next week about pre-approval and my credit score and what not.

[fumesucker]

Yeah, if your Saturn runs good and you don't have a lot of money in it don't buy something more expensive.. At 9k/year you aren't going to save all that much by buying a Yaris..

I suspect the longer you wait, the more house you will get for the money.. And if you're saving money right along, the bigger your down payment can be the longer you wait..

At your age it's hard to see the long view, one of the few good things about getting older is that it gives you perspective.

I would advice patience right now and pay close attention to the housing market.. The further away the house you buy is from everything the better price you can negotiate.. A fixer upper in an exurb would probably be the way to go for someone mechanically talented that has fuel efficient transportation.

[Project84]

good solid advice.... thanks!

[fumesucker]

You're most certainly welcome..

One final point.. The longer you wait the more looking you can do for the perfect candidate house.. Try to find something that has solar potential and room for a good shop.

With energy prices skyrocketing, solar is going to come on like gangbusters. A house that is already positioned and exposed for good solar heating will be a big plus.

[Project84]

The biggest problem I have is really my expectations. Even for a first home, I want an oversized lot, 2 car detached garage/workshop, and at least 1.5 bath and 3 bedroom as I currently have a 2 bedroom townhouse and the second bedroom is my office, but when my parents or other family comes to visit, I have no where to surf the web (and I hate laptops....)

lol

So yeah, I'm a bit picky.