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Has Frank finally found his house?

Posted by Scott Van Voorhis September 5, 2012 07:32 AM

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Our loveable tech guy Frank has been house hunting for the past four years while renting a condo in Woburn with his wife.

Frank is not looking for his dream home - but rather a half decent abode for something less than $400,000 that he can start a family in. A diamond in the rough, as he puts it.

It's been quite a journey, to say the least. Frank got laid off during the recession, but bounced back and found a new job without any serious financial damage.

He's fumed at pricey new construction in Woburn and had more than one of his below-the-listing-price offers spurned, sometimes rather rudely.

Frank even got a real estate license in order to get easier and quicker access to homes he might be interested in.

But with rents going up, up, and up, Frank says he realizes now is the time to make the jump.

Now Frank believe he has finally found the house he has been looking for all these years in an unnamed town - not one, he assures us, that begins with W - but first wants to get the advice of the bears on this blog.

"This is key for me, my RENT will NOT go down, in the coming years," Frank writes

Here's what Frank wrote to me yesterday:

Current situation: 2BR/2Bath, Rent $1750 + $50 for a storage unit, so all in at $1800. Lovely luxury condo, about 1150 sq ft, and quite suitable for us as a couple, BUT we know it will get crowded once kids arrive.

Target house: 3Br + "den", 1 1/2 Baths (listed with 2 1/2 baths, but the 2nd full bath is in the basement, making it almost useless to me), about 2000 sq feet, in a "top 20%" School District. (ie, good schools, but not a "W" town) within 128/95. (No, I am not going to post the actual target house, as I don't want to bring direct attention to it).

Listed for $440k, with an assessment of around $400k, I can likely get it for around $380-390k. It needs "cosmetics" mainly, but the kitchen is waaay outdated, which is why I think that it hasn't sold yet, this spring. Sellers bought it for around $250k in the mid-90's, so they can easily afford to sell still walk away with a profit.

With a 5% down payment, at 3.5% interest, my monthly mortgage payment would be $1650 or so. Add in taxes of about $500 a month, and $100 a month insurance, and my PITI comes to $2250 (before deductions) or about $2000 (after deductions).

I am budgeting for $300 a month in maintenance (forced, put directly into a separate account, every month) AND would be paying down the mortgage by about $600 a month or $7000 a year.

To me, paying $200 a month more, to get almost double the space, and effectively have a 'wash' in terms of "savings" ($200 + $300 Maintenance - $600 principal pay down) is worth it, especially with indications that rents will be going up again next year.

I doubt that I am going to get much if any appreciation in value over the next 5-10 years, BUT since I must spend something on 'housing', that $7000 a year pay down seems to make things attractive for me to do so now, especially if I can get the place for about 5% under assessed value.

What do you think?

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About boston real estate now
Scott Van Voorhis is a freelance writer who specializes in real estate and business issues.

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