Buy home and keep renting in the city

 I'm living in Chicago and really don't want to change that.  I'd like
to buy, but prices for anything I would like (at least same as current
appartment) are over $420,000.  The mortage would be $1300-$1500 more
per month!  Taxes and assesments tack on at least $450 to the expence.
It seems that prices are inflated, but who knows, they may continue to
rise for twenety years!

What are the thoughts about buying a "vacation/weekend/country" home
outside the city at about $225,000 and continue renting in the city?

 

Depends on your values I suppose, and your motivation for buying.  

As a 30 somthing married suburbanite of Chicagoland, I'd call your
plan "Pure finanical insanity."  

The "buying something" inpulse is a very good one in my opinion
because insurance rates are still quite historicaly low, and
Chicagoland real estate has a long history of steady appreciation
unlike more volatile markets on the coasts.  You are correct, though
that prices have had a pretty dramatic rise in recent years especially
in certain parts of the city.

But to continue renting in the city after buying something in the
suburbs... you'd want to be very careful about how much you're paying
because you'd be pissing all that rent money away, and for what--the
convenience of being in the city.  The big question is "how much is
that worth to you?"  The rent money could be put towards investments
in financial markets, other real estate, improvements on the house you
buy, or anything that might actually appreciate versus be gone at the
end of each month.

At some point the whole hunting for a parking place and playing car
shuffle bingo during show emergencies in the city will grow old and
you'll flee out here anyway.  :-)

Another option you might consider is purchasing a rental property in
the suburbs where there's convenient access to the Metra with thoughts
of moving into it eventually, or pooling money with a trusted partner
to get a 4 flat in the city where you can live in one of the units,
and flow income off the other 3, or things like that.  Get to the
library and check out some of the Rental Property for Newbies sorts of
books, of which there are many.

If you're a 20-something there's nothing like the chicago nightlife,
but at some point you might find yourself wanting a yard and a
guaranteed parking space when you get home at night.  :-)

Best Regards,
--
Todd H.  
http://www.toddh.net/

 t@toddh.net (Todd H.) writes:


Doh.  this was supposed to be "interest rates" btw.


--
Todd H.  
http://www.toddh.net/

 
If you think buying something where you are is too much at over $420K,
how are you going to buy a vacation property for $225K and pay the
carrying costs of that (ie mortgage, taxes, utilities, maintenance),
plus your current rent?  It would seem to me, that both are gonna wind
up pretty much the same.  But, at least the mortgage on a larger place
is tax deductible, while rent is not.

 You don't sound crazy to me.  In some markets (perhaps Chicago) rents
have not caught up with property values, so you may have a good value
for where you are.  If city living is your current choice, stay put.
BUT investing in something you can afford, and might want to live in in
the future is not a bad idea, as long as you can rent it out at a break
even or even positive cash flow.  Real estate is always a good long
term investment when you buy someting that is fundamentally good.  Look
for a place in one of the less popular burbs, that is on it's way up
and you'll see good capital appreciation even in the near term.

Do invest in some good research at the library and on the internet
before you leap.  Buy the fixer upper in a good solid neighborhood :)
and good luck.