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Buying my first house - I'm scared

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Posted Aug 3 2008, 10:52

I know this post is rather long, but I appreciate any comments. I'll try and keep it as short as possible.

I've discussed my situation before on this and other sites and I asked whether it made sense to buy now or wait. Most of the advice that I got at the time seemed to suggest that it would be better if I waited since it's likely that I'll be moving from my current location in a year.

Quick history: I just graduated school in May, I start work on Monday in DC (1 year job) and I move to Florida next year (probably) for at least three years. So, the advice was to wait until I move before looking to buy a house. I appreciated all the comments and advice I received but I still feel buying a house is the right step for me now (even more so than when I move). But, I'm scared as heck :)

Lots of thoughts go through my head about whether I should be really buying now. Some of my friends say that I should wait until I'm more financially stable. They are probably right although I think they are referring to the fact that this is a huge step in my life (one that none of them have made) and the market will still probably go down even more. Although my friends don't have an eye towards the investing side of real estate that I have, they do have a point.

My first day at work is Monday. I don't even have my first paycheck yet. So, I neither have a downpayment nor any reserves to buy a house. If by some strange and unknown reason I lose my job, or end up in the hospital, I'll probably be screwed. They say I should wait a year and save up some money during that time.

My thinking is a little bit different. In my opinion, I feel as if I'm in the best financial situation to buy a house. That's in part beause, although I'll be making $50,000 (which I realize is nothing) now, I'll be getting a paycut ($40,000) when I move to Fl. Moreover, I qualify for an 80/20 loan with Bank of America through their community accommodation program. So, I'm getting a house no money down (don't need reserves for the program).

Given my timeframe, it's unlikely I'll be able to purchase anything in September or October and I am realistically looking at purchasing a house in November or December. Up until that time, I'll be able to save two to three months of reserve even with my current bills (which aren't a lot - especially since my student loans are on deferment). Notably, my rent of $700 will go up to $1650 in November because my roommate is moving out and it's not as easy to replace a roommate in this large apartment complex (they are very inflexible in terms of income requirements etc). Of course, I can afford it but would rather put that money towards a mortage of about that amount rather than in rent.

My goal is to purchase a house at a discount and not at retail. I plan on placing great emphasis on its rentability and the potential to acquire positive cash-flow. Additionally, I plan on keeping the house for the long term (I'm one of those buy, hold and never sell kind of guy - for now). I'm 28. Even if I move to FL (there's a small chance I'd stay in the district in which my pay would increase rather than decrease, but I'm thinking conservatively), I'm content and otherwise mentally prepared to be an out-of-state landlord. I also like the idea of having a property in or close to the District for me to use or otherwise occupy when I do return. Maybe the real life frustrations and practicalities of being a landlord will change my mind, but from everything I"ve read and looked at, I feel as if I'm prepared. I guess I'll see :)

So, to come to a close, I'm just battling various emotions. It's my first purchase, my friends think I should wait (not all of them), I am nervous and scared that I might be making a big mistake, yet, I feel as if this is the right time to buy. I plan on using a real estate agent I met at a reiclub meeting who is familiar with investment strategies such as subject 2s, lease options, foreclosures, etc. She also agrees with my philosophy of not buying anything retail.

Anyway, what do you all think. Am I just trying to rationalize a difficult decision? Is my thinking process correct? Or, with the limited information I've provided, do you think my friends are right?

I know the post is long but I look forward to your responses.

Thanks.

PS: Great forum

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