Location, location, location…best three rules of buying a house. Better a cheap house in a great location than the ideal one in a location you don’t want…
Of course, if the cheap house has room to expand, then you could add to it.
There is no such thing as a risk free investment. Yes your situation could change and you have to sell the house and move to a smaller one. Or you buy the smaller one, your return on equity is less and the larger house moves out of your price bracket because it net increase is greater.
Ultimately the choice is your peace of mind or greater possible return.
It’s the same with any type of investment. If you buy 5 year Treasury bond you’ll receive 4.5%pa back on your money. If you buy Russia 5year you’ll get 7.6%pa.
In the end it’s personal choice, are you a wolf or a squirrel? Are you off hunting see what you can make and do what you have to do to make money both winter and summer. Or do you play it safe horde your nuts thought the summer and sleep all winter.
Wolf. Buy the £300,000 house and go out there and get the money to pay the mortgage. If things so bad then just call it an investment risk and more on. Go well, you’ll be sitting happy making a killing on the property markets.
Squirrel. Buy the £150,000 house, sleep peacefully every night and see any un-made gains on the property market as “Peace of mind” Hedge, no tears.
Each scenario has its merits and it’s flaws.
Me???. I’d buy the £300,000 and sell my kidneys if need be. But that’s me not you…. Good Luck.
One final point, since the idea of investment value has been revisited. A year ago I cashed in a bunch of stock and paid off my mortgage. While I thought I was taking a hit at that time, today I’m glad I didn’t just leave it where it was. I’m pretty incompetent as an investor (as well as countless other areas).
In my neighborhood, it’s a pretty safe bet that my house won’t LOSE money. Certainly not at a rate similar to recent stock declines.
I was going to guess the northeast too. I can’t remember the last time I saw a house that wasn’t deemed a “handyman’s dream” for sale in this part of the state for less than $200,000, and prices only get worse as you get closer to the seacoast.
Another homeowner from the Northeast checking in. My condo is worth about 150K and it’s a 700 sq feet loft. You certainly can’t buy a house for 150K anywhere around here.
About the bank telling you 290K. This just means that that is the max that you can finance with them. If you try to get a loan for more, then you won’t get it. Just because this number is the max does not mean that you should spend that much.
I live in one of the more affordable areas of California, and though you could get a house for $150,000 a couple years ago, it’s well-nigh impossible now. Nearly everything is $200,000 or more.
I don’t think you should spend your maximum on a house. Too many things could happen in the way of income loss.
Thanks for the insight. At least I understand now the advantages of maxing out your ability to buy a home. Today, at this minute (I may change my mind in a couple of more minutes), we just cannot justify spending that kind of money. To add more details, one of the reasons is that my job is not the most stable around (I work for a start up biotech company, that has a very good chance of not being around in 3 years), plus I may make the jump into teaching at a local college, which will require a pay cut. For those reasons we won’t spend the $300,000. But like I said, at least I understand (a little more) why one would want to.
Another point is that the northeast is having a huge “seller’s market” right now. Houses are very high, and they are selling.
This could all change in a year or two, or even a month or two. I’ve seen it before, and it will happen again.
Also, you could qualify for $5 million, but the house must be appraised for that value. That’s currently causing problems, as houses are going so high finding comparable sold properties is hard.
Very much so. While I’m no real estate expert, a few facts are pretty glaring. The market’s lost a ton of value, interest rates are still fantastically low, and families are leveraging the swiftly rising equity in their house and thus going deeper into debt.
There is only so long the economy is going to be able to maintain this level of debt with such falling share prices. Looks like there’s a bit of a housing bubble on our hands, and sooner or later it is going to burst.
YMMV.
Seconded. Worst house in a nice area is a better investment than the best house in a poorer one.