Several of my friends have bought really nice condos the past six months. Lately people have been asking me, “Paul, are YOU going to buy this year? There are some great deals out there. Will this be YOUR year to buy a condo?”
My answer is: Probably not.
Lately I’ve been kicking around this condo-related idea in my head, and I’ve told a few people. Some of them think it’s a really smart idea, and others think I’m crazy.
Here it is: I’m thinking about not buying a condo at all, but rather renting for, say, 10 more years. During that time I’ll pile up money in the bank, and then when I’m ready I’ll skip the mortgage altogether and pay cash for a condo.
It probably won’t surprise you to learn that the people who think that’s a stupid idea are in the real estate and mortgage industries. “Paul, you always want to buy real estate with O.P.M.,” they tell me. “Other People’s Money. That way you can invest your own money in the meantime and make a higher rate of return. Plus, if you wait 10 years you’ll be missing out on appreciation in property value. And, you’ll be missing out on the ability to deduct the interest on your mortgage from your taxes.”
I understand what they’re saying, and there’s a lot of validity to it. And for investment real estate, I agree with them on the “O.P.M.” principle. However, in my mind the rules are different for one’s primary residence – in that case I believe the rule to follow is, “do what feels right.” For me personally, knowing my unique psychological makeup, my likes and dislikes – paying cash for a condo is what feels right.
The thing is, if I were to buy Downtown, by the time you add it all up – principal, interest, property taxes, association fees, and insurance – I’d be looking at a $1500 monthly payment AT LEAST. Now, with my current job and my current income, there’s no question that I could afford that. The problem I have with it is, I’d be committing myself to make that payment every month for the next thirty years.
I’ve heard that employers like employees who are “mortgaged in” because they’re a lot less likely to leave. They can’t – they’re stuck. Even if they consider it, the fear of “OH MY GOD I’LL LOSE MY HOME” will kick in. I don’t like the idea of being “mortgaged in.” I mean, I like my job at the City Schools (obviously, since I just agreed to go permanent) but I don’t like the idea of committing to ANY 40-hour-a-week, 52-weeks-a-year job for the next thirty years.
At some point I’d like to go independent and start my own consulting business. That’ll be a lot harder to do with a big mortgage payment hanging over my head. And what if I decide I want to take a few months off, maybe travel to cities I haven’t seen yet (Manhattan, San Francisco, Seattle), or go overseas and spend some time with the beautiful women of Eastern Europe? What if I want to return to teaching, a more fulfilling but less lucrative career? Not saying I’ll necessarily ever DO those things but I want to at least have them as OPTIONS. I’m too much of a free spirit.
And I want to always have the option of moving into a $400-a-month apartment out by the U of M and living dirt cheap. Again, not saying I’ll ever DO it, but I want the OPTION of it. Can’t do that if I’m mortgaged in. (Well, I could, but I’d have to go through the whole rigamarole of selling… whereas, as a renter I could just move.)
So, for the forseeable future I’ll remain a renter. I’m not going to stick to my no-mortgage concept to the point of stubbornness though – if the right property came along, and I fell in love with it as a living space AND it was an incredible deal, then I’d bite the bullet and borrow money to pay for it. But it would have to be an AWESOME opportunity that’s just too good to pass up.
Heh… I bet a lot of mortgage lenders are HATING me as they read this, worried that I’m going to start an idea virus among my readers.