Justification - It's Too Expensive To Buy

One reason why I am against buying a house is because of how expensive it is in our area - $1,000-$1,200 per sq. ft. Since I am not a numbers person and my brother is, I asked him to help me play this out.

Using a price tag of $1.5M for a 1,500 sq. ft. home:
  1. Property Taxes - This will be around $22,100/year, 2.6x more than what we are paying now ($1.5M tax basis vs. $575K tax basis).
  2. House Payment - If we sold the condo for $1.1M and netted $1M after fees, we would need another $857,000 to buy the house.
  3. Interest Expense - If we take out an $857,000 mortgage loan, interest will be $42,500/year - more than 4.08x what we are paying now due to the maturity of our current loan.
That's $64,600 per year for property taxes and interest alone, $45,800 more per year than what we are paying now.


Question #1: If we need to borrow the $857,000, are we willing to be in debt for another 20-30 years? Most people nearing retirement want to pay off their homes and be debt free - not the other way around.

Question #2: Let's assume we have the money. Is the extra 150 sq. ft. and a yard really worth $857,000? We can reconfigure the condo to create a third bedroom, so what we are really talking about is the yard.

Question #3: Are we okay with paying $22,100/year just for property taxes? How much is that over 10, 20, 30 years?

Question #4: Does it make sense to buy a home when prices are at an all-time high? If the market drops, we lose value just like that, whereas we would be ADDING value by simply renovating the condo.

Question #5: Can someone please help me out here... ?
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3 comments:

  1. TomDecember 24, 2018 at 5:12 PM

    When looking at the entire picture the answer is fairly clear. I took a cursory look at houses in areas within 30 miles of your current condo. Any home that is worth considering are 1.2 million or above. In addition, by moving you are already in the negative by leaving the area you love. Financially, it makes the most sense to remodel the condo. Current and future cost will be considerably less at the condo. Although I'm not familiar with labor cost of contractors in your area, it is safe to,say a budget of 75-100k will be more than enough to meet the changes you desire. This includes, kitchen, countertops, cabinets, flooring and bathroom remodel. I personally feel that you would be squandering the equity you have in the condo if you were to use it to buy a new house. You will get the best bang for your buck in increased value of a remodeled condo.

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  2. Gleannemarie70December 25, 2018 at 6:00 PM

    On the premise of finances and return on investment, I think the reasonable, sensible thing to do is remodel.

    Having to get ready and pack up to go to the park is an inconvenience, that is true. However, I am not convinced that convenience is worth the kind of financial investment that staying in your preferred area would require.

    My only advice in moving forward is that you consult with the appropriate professionals regarding building codes and condo requirements to see what is possible before you get too excited about the possibilities. And remember, The Baby Boy is going to gain square footage and the condo will remain limited in that resource. Boys tend to have a lot of equipment and require a lot of space. You will likely have to give up some of your wants for his eventual needs.

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  3. MaryliciousJanuary 19, 2019 at 3:04 AM

    purely from a financial perspective, it does make more sense to stay put in the condo and remodel.

    Although, I also agree with the point Gleanne Marie made about how Mason might need more space as he grows up and has more stuff to store for all the activities he would be engaged in - sports / hobbies , etc...

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