House Buying Advice--What to do?

[Haven]

I''ve posted a bit about our situation already, but here''s a brief synopsis:

FI and I currently live in two separate condos in Chicago. We plan on keeping both of our condos as rental properties, and purchasing a place together in the northern suburbs.

The Original Plan: Purchase a small "starter home" in our desired location.
After searching for a few months, it was clear that the amount we''d like to spend on our first single family home (~400K) buys absolutely NOTHING in our desired area. Okay, it does buy something: old, in need of repair, and teeny tiny. And not old in a "wow that home has character way" (those are MUCH more expensive) but old in a "wow, that home is really old" way.

The Modification of the Original Plan: Purchase a small "starter home" in a nearby location.
Hmm. One would think that moving either farther north or west from the city would buy one more home. And it does, but not much. After searching for a while we realized that we really don''t feel great about spending 400K on an "okay" home in an "okay" location.

The Most Recent Plan: Purchase a super-cheap townhome (~200K) in desired location and save gobs and gobs of money to buy a single family home in the "right" location in the future.
This is what we''re working on now. If we did this, we could put half down on the townhouse, have a super cheap mortgage, and save up a lot to have more buying power when we purchase a sfh in the future, which would hopefully get us a sfh in our desired location.

THE QUESTION: What would you do? Sacrifice location for a larger, nicer home, but one that you STILL couldn''t see yourself staying in for very long? OR sacrifice size for a super-affordable townhome in the right location?

Is there another option we haven''t yet explored? (And no, we can''t stay in either condo, we''re set on moving to the suburbs.)

Thanks for all your input!

 

[Skippy123]

I would talk to a realtor and see how homes are appreciating versus the townhouse. Then I would play with the numbers after you find out more info on house versus townhouse to see which one would benefit you guys in the long run. It sounds like the townhouse idea is best but it would be interesting to find out how that areas is appreciating versus the burbs. How exciting!!

 

[Dee*Jay]

Boy Haven, that''s a tough one...

Let me throw a few questions out there. If you bought the super affordable townhome how long would you have to stay in THAT, given what you''d be saving every month, before you could buy something that you wanted? I.e. how much would you *really* be saving each month? And don''t forget not to think about the ones you want only at today''s prices; if they go up too you might not find yourself better off by virtue of having more $$$ because they would simply cost more $$$ at that time.

I''m sure you''ve already explored the idea of selling both condos and putting the proceeds toward getting what you want, yes?

I''m not being much help here, am I...

Let me sleep on this and see if I come up with any ideas.

 

[Haven]

You are both being helpful--thank you! (Can you tell I''m anxious, I think I let only 10 minutes go by before I re-checked the post!)

Skippy--I haven''t thought of that, thank you! I''ll talk to our realtor tomorrow.

Dee--We''d only have to mortgage 100K if we bought a townhouse, so we''d be able to easily live off of my salary alone (and mine is the smaller of our two) and save AT LEAST 50K a year living very comfortably and still vacationing. SO, I think we''d live in the townhouse for 4 to 5 years and then have a 200-250K down payment, which is double what we have for a dp now.

We have thought about selling the condos, but I really like the idea of having the rental properties. I am absolutely set on keeping them. Stubborn, I know. (But hey--I worked hard to save this dp money! I want to get to keep my condo! Stomp stomp stomp all the way up the stairs . . . )

I''m also worried about the future of the housing market--will we be passing up a great opportunity now only to find that we still can''t comfortable afford anything we love in five years?

Oh, the agony! (<--I''m hyperbolizing, don''t worry, but it is stressful!)

Thank you for your responses, can you tell I''m a mess?

 

[oobiecoo]

Have you considering building a custom home? They do not need to be expensive or extravagant. I''m a firm believer in building (or buying!) a smaller home that is very well planned so that it feels larger and more comfortable than something a little more generic. I''m not sure of land and construction prices in your area right now but you may want to look into it. I HIGHLY recommend "The Not So Big House" by Sarah Susanka. It gives wonderful suggestions if you go that route!
Otherwise, I would say go for the townhome now so you can save for your dream home.

 

[lyra]

Honestly, I''d sell both condos and look at buying a house in a good area that you could maybe do some minor work to and sell for a profit. Repeat as necessary until you have the house you really want. Traditionally, condos and T/h''s are harder to unload, whereas houses are easier. If you go in thinking about making a profit then moving on, you don''t have to be too emotionally attached to whatever property you buy. This is what we have done and are just about finished with our current home.

 

[sap483]

We were in a similar situation this past year. We ended up keeping FI''s 3 family home as a rental and purchasing a smaller home in the suburbs of Boston. It''s not our ideal home by any means, but we like to do home improvement projects (FI is extrememly handy and renovated his entire 3 family on his own), so we''re hoping to fix it up over the next couple of years and sell it for a good profit. It''s in a location that we want on lots of land, so we figured that the rest we could fix. I think location is really important, because you really can change the rest.

 

[Haven]

Thank you for your responses, everyone. This is really a tough decision, and I welcome all input.

oobiecoo--Thank you for the Susanka suggestion--I''ll definitely check it out. We were looking at new construction homes a little while ago but they were too far out in the burbs for us. I haven''t found any good pieces of land available, but I''m going to keep an eye out after your suggestion. We did think about buying a small old home and tearing it down, but that seems to be too expensive, as well.

lyra--We are dead set on keeping the two condos, and I really think this will be a wise choice for the future. If we were having a hard time affording anything, I''d sell at least one, but since we do have options we''re keeping ''em. I like what you said about not becoming emotionally attached to a property--this is something I''m going to have to work on! We looked at a converted one-room schoolhouse and the moment I walked in I fell hard! I was absolutely sure we were going to buy the place, but FI was able to bring me back to reality (the basement was unusable, there were only two tiny bedrooms and the closet space was almost non-existent. But it is an old schoolhouse! I''m a teacher! I was hooked, but now I''m over it. Sigh.)

sap--Thank you for sharing your story. I''m thinking location is more important, too, so at this point we''re leaning toward a townhouse.

We''re hitting the pavement again this weekend to look at townhomes and houses. I''ll let you know if we find anything!