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Started By
Message
When does it make sense to buy vs rent?
Posted on 3/22/14 at 12:21 pm
Posted on 3/22/14 at 12:21 pm
I'll be moving in the next few months to Richmond, VA. I'll be there for at least 5 years with my fiancee(getting married within a year, been together for over 7 years, so no split in sight). Combined income will roughly be 100-120k.
I guess the main reason we are considering it is that we want a yard and to get rid of the apartment-type neighbors. Seems there's much more options to buy a house vs renting a house.
I know that I will have to pay property taxes, insurance, and maintenance/upkeep and that will definitely factor into the final decision.
But just wanted to see if there's other things I should consider etc.
I guess the main reason we are considering it is that we want a yard and to get rid of the apartment-type neighbors. Seems there's much more options to buy a house vs renting a house.
I know that I will have to pay property taxes, insurance, and maintenance/upkeep and that will definitely factor into the final decision.
But just wanted to see if there's other things I should consider etc.
Posted on 3/22/14 at 12:39 pm to Puffoluffagus
I think mobility/flexibility make the biggest impact. If you are planning to move, or your job may require you to relocate, renting makes a lot of sense.
7 years would be worth it to buy IMO. However, that also assumes Louisiana rates and COL. I know in some places, it's fairly expensive to buy a nice place compared to renting. If the economics are similar (rent/mo vs mortgage/mo), I don't see a big negative to buying a place.
7 years would be worth it to buy IMO. However, that also assumes Louisiana rates and COL. I know in some places, it's fairly expensive to buy a nice place compared to renting. If the economics are similar (rent/mo vs mortgage/mo), I don't see a big negative to buying a place.
Posted on 3/22/14 at 12:46 pm to LSUtigerME
quote:
. If you are planning to move, or your job may require you to relocate, renting makes a lot of sense.
I could see myself moving again at then end of the 5 years. The type of job is pretty much a guarantee that I won't have to relocate over the next 5 years unless I get fired.
quote:
If the economics are similar (rent/mo vs mortgage/mo)
Yeah, I'm going to be looking more into this over the next week to get a better idea of my options. I just found out recently that I will heading to Richmond so haven't had time to completely look into the entire area.
Posted on 3/22/14 at 1:28 pm to LSUtigerME
quote:
think mobility/flexibility make the biggest impact.
Similar situation for me and this is the main reason I continue to rent. I won't have the headache of getting rid of a house without knowing where the economy will be at that time. I also work a lot so it is nice not to have to do real maintenance.
Posted on 3/22/14 at 2:09 pm to Puffoluffagus
5 years is not long enough to justify buying for me. If you plan on improving the home much at all, you will find you'll come out ahead renting.
Not considering all the costs associated with selling; realtor fees, housing price fluctuations, etc.
Not considering all the costs associated with selling; realtor fees, housing price fluctuations, etc.
Posted on 3/22/14 at 2:17 pm to Sigma
As an extremely generic rule of thumb, if rent vs. mortgage come out to be about the same per month, I think moving in under 5 years you'll likely lose money buying, 5-7 you'll likely roundabout break even, 7+ you'll likely save money by buying.
Posted on 3/22/14 at 2:36 pm to LSUtigerME
quote:
7 years
I'm pretty much here - 5 years is probably the "break even" - so, if it is a maybe stay/maybe go - that might be my starting point, but if 7 is definite, buyers look to come out ahead.
I would be cautious about this with anything other than conventional financing (and I put 10% down in that category) with 100%/near-100% financing, you take a chance of taking a bath when you move. I would also say these "we're not sure" housing situations are better with a 15-year mortgage - builds equity much faster, especially over 5 to 7 years, giving you a buffer if you have to go sooner than you might have liked. Easier to aborb losses in transaction costs, although it does make the monthly cost higher. Looking at it another way - even if believe in 30-year (I don't) you can refi into one if your situation locks into a perfect one after 5 to 7.
Posted on 3/23/14 at 9:28 pm to Puffoluffagus
Rates aren't as low as a year ago but are still low historically. FWIW the Richmond metro area is about the size of NO, it's a legit city to put down roots.
Really the question is whether you want to settle down in Richmond. If you do then buy. If not, then don't.
Really the question is whether you want to settle down in Richmond. If you do then buy. If not, then don't.
Posted on 3/24/14 at 4:35 am to foshizzle
buy it then lease it when you move 5 years later.
lets see buy it for 800 month
then lease it for 1200 a month.
depending on how expensive the house is of course
lets see buy it for 800 month
then lease it for 1200 a month.
depending on how expensive the house is of course
Posted on 3/24/14 at 6:03 am to Puffoluffagus
Does your company have a decent relocation package? If so, and if you move for work, an owner's relocation package is usually much more generous than a renter's. The costs of buying may be covered by the employer, so moving in 5 may still be OK.
Posted on 3/24/14 at 6:36 am to Puffoluffagus
Since rates are so low, and you are only in for five years, why not purchase on a interest only loan? You benefit from a much lower payment that offsets the costs to purchase. You benefit from any actual appreciation in value. You come back to the MB and get advice on investing the difference in payments that will grow much more rapidly than real estate.
Posted on 3/24/14 at 11:34 pm to brbowhunter
quote:
buy it then lease it when you move 5 years later
Was thinking about this. If I do buy it would likely be in the VCU area in which I could lease it if I end up moving after 5 years.
Posted on 3/25/14 at 10:58 am to Puffoluffagus
To each his own here - but for me, whenever I move to a new area, I prefer to rent for a good 6 months just to learn where I really want to live.
Someone made a point a few posts back regarding your company's relo policy - this is a good point. Relo for an owner is usually much more generous.
Someone made a point a few posts back regarding your company's relo policy - this is a good point. Relo for an owner is usually much more generous.
Posted on 3/25/14 at 11:16 am to LSUfan20005
Always buy. Learn the area before you move. Rent is just throwing money away.
Posted on 3/25/14 at 12:56 pm to Spirit of Dunson
quote:
Does your company have a decent relocation package? If so, and if you move for work, an owner's relocation package is usually much more generous than a renter's. The costs of buying may be covered by the employer, so moving in 5 may still be OK
This. I just moved for work with a relocation package. As I understand it, the tax law allows for many more items to be expensed if you are purchasing than if you are renting.
Besides, you'll get the mortgage deduction that you wouldn't get.
Based on my experience relocating here's what you need to know:
- Is this a house I actually want to own? Would I be comfortable trying to sell it again or living in it for 30 years?
- Is it the right neighborhood?
- How much investment is required to make this a house I actually want to own?
- What does it cost to rent?
- What is the cost of financing?
Relo package aside, here's a little math I did on the subject:
- Average house in the US $250k
- Mortgage payment on $200k ($50K downpayment and 4.5% rate): $1001.52
- Property Taxes: $300
- Total nugget $1,301.52
- Actual principal over 30 years being paid each month: $556
- Deductible interest and property taxes over 30 years: $745.44 (Total ~$9k / year)
Cost of all the bullshite required to buy and close on a house: $~9k. But assume you were going to buy in the future anyways and were just being conservative?
Annual tax benefit alone to purchasing vs. renting (assuming payments are equal) ~$2K at your income level (I think, not a tax accountant just back of the napkin math).
My advice would be to just make sure you won't want to move in the immediate future, don't just buy for the sake of buying.
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