Sell my car for a down payment on a Condo?
 

I'm going to be going to grad school next year and am aplying to universities in bicycle friendly towns. The University of Oregon in Eugene looks really good. When I first got to college my dad bought me a used Xterra. The only reason I can't sell it now is because he is currently paying my way through college and selling it would be rude. Well, for grad school I'm paying for everything. So I was thinking, if I live in a nice city I could sell my car and use the money for a down payment on a condo. Think this would be a good idea? Instead of loosing money every year I'll be gaining money by investing in a condo (and not paying rent which I'll never get back). The only problem is that I hit a deer with the Xterra and it got some body damage which will definately take it's value down even though it works perfectly. What do ya'll think?

The car for condo while in school plan has worked well for me. Depending on your field, however, there might be a more car-free-friendly schools/towns out there...

Shoot, why are you even asking the question? Sell that car already... your condo awaits!

Koffee

agreed -- hook up with a nice realtor who knows the town and suggest a good lender, visit the lender and see what you can be approved for, and tell him/her your plan about the car.

also watch HOA fees on condos. i moved into a 9 unit townhome last year and love it, fees are $125 a month. but some highrises and other places i looked at (downtown denver) were over $300 a month!!! now that's money down the drain, and you wouldn't use a pool that much. i think the smaller the condo group the better. our neighbors help with tree trimming, i shovel snow, and nobody is a "busybody" about rules and book stuff (we all respect each other).

you may need to rent a truck once in a while to bring home some stuff from home depot, but overall i think it's a great investment

good luck - and get a good home inspector too, and get some "checklists" of preventative maint. type stuff. i poke around once a week or month for leaky faucets, furnace filters, mice, etc. anything i can fix early for cheap cost rather than wait and have more damage...

I agree with Koffee. Selling the car and buying the condo are separate decisions and should be made separately. The sell the car decision involves living with or without the car. The condo purchase should be decided in terms of alternative shelter costs. They represent separable cash flow series, unless you would consider living in your car. Even then, you find the best non car shelter option to compare with the best car-as shelter option. Now I wonder: if the car offsets shelter costs is it still such a no-brainer to live car free?

Yep, get the condo, no contest. I got rid of my nice car for a condo a few years ago, but still needed a beater car to get around.

Now, if only I could sell my car and go car-free in LA :rolleyes:

What? More friendly than Eugene?
There might be a few but not many.

Sell that car, it will help you with the downpayment. Lenders like to see you have a little cash in the bank.
Insurance, gas and maintenance cost will take a large chunk of your monthly payments.

As recommended above, get approved first for mortgage and see how much $max you can borrow, then do your budget and check how much you can pay per month, this will determine how much real estate you can afford (use a mortgage calculator).

Meantime get familiar with the real estate market, locations, prices etc. I'd recommend you do this with and without a realtor. Don't lock yourself in a buyer's agent agreement rightaway and not until you feel the agent knows the market real well and will work on your best interest. Visit different realtors and ask to view some of their properties.

Once you will have your condo, not only you will be paying against an investment, but you will also very likely build equity as market value increases and your loan goes down. At this stage you will have the options to borrow at low interest rates should you need to buy a new car,... sorry... bike! :) , sell the condo and move to a larger home, etc.

Good luck, and don't worry about the damage, aren't these vehicles made for hunting wild animals? :rolleyes:

That's a very good point. Owning is much more expensive than renting, even if the rent and payment are the same. My wife and I just spent over $1200 on a relatively simple plumbing problem. It is nice to know that most of our monthly payments will be coming back our way someday, but don't forget to examine all the hidden costs.

Thanks for the information everyone. I don't know much about real estate so this has all been a big help. If I can live in a city with a train station or airport (or at least bus service to one) I'm going to ditch the car.

Definitely lose the car if you can! But I will caution against home ownership at this point. No market is guaranteed to go up year after year.

Try to imagine this scenario: You buy the condo and find that you are get eaten up replacing old appliances. Then you get a sudden assessment for emergency roof repair from the condo board. Suddenly car maintenance doesn't look so bad. 2 years go by and you're ready to graduate. You land a great job in another city but when you go to try and sell the condo you find that the market has turned (the predicted rise in interest rates has finally happened) and you can't get what you paid for it (and remember there are heavy transactional costs in selling property). It is not unheard of for condos to decline just as rapidly as they have been going up the last couple of years.


You will be ready for home ownership when you are:
1) Secure in a job (say working there for 18 months or more)
2) Can reasonably say you plan to stay for the next 5 years (in that job or one you can readily get in the same area)
3) Have at least 10% saved for a down payment.

Don't rush into home ownership. Long term home ownership is, for many Americans, their surest way of accumulating wealth. But home ownership without a secure foundation (job, savings, clarity of future plans) is often a quick way to bankruptcy.

Cool. More good info. I'm thinking about joining the Peace Corps before grad school so I may just sell the car and put the money into a mutual fund or something. So, now I am not sure if I'll buy a condo (I'm kinda afriad the housing buble will burst), but I'm definately getting rid of the car one way or another. Thanks!