How to decide if we should rent or buy?

[MidwesternGal]

Hello!

My DH and I are considering purchasing a house when he gets transferred in the next 6-9 months.

However, the situation we are in is a little bit different than most people's--we KNOW for a fact that we'll have to move again anywhere from 2-4 years after that move, due to DH's job. There's a lot of transferring requried for the first 10-15 years.

Depending on what resources I read, we have needs that fit both the "buy" and the "keep renting" categories. I have read some sources that say if you're in it a year or more, buy! And some others that say you shouldn't buy unless you know you'll be there 5-7 years at minimum. We would be in this house for 2-4 years.

I'll try to bullet most of the major points I think about when considering:
--When I do mortgage calculators, our monthly payment would be $100+ less than our current rent (which is on the high-end of middle for our area). That would help offset some of the other expenses with home ownership (taxes, homeowner's insurance, etc).
--We have a dog, which usually makes rent in the larger towns go up at least 100-200 a month.
--In the area we'd be moving around in, you can usually (though not always) find a liveable fixer-upper for around 60K, sometimes less (one good thing about the midwest!).
--My FIL and father both know how to lay carpet, drywall, do other flooring, some structural repairs, etc. and MIL and my mother both paint, etc, and I know they'd be willing to help out for a few days doing the bigger projects. Dh and I can do some of this, but would need help from the more experienced. This would save us considerable $$ when it comes to labor.
--While we don't have a huge income, we also don't have huge debt--under 8k for a car and student loan combined.
--Most rental agreements are for a full year or 6 months--so when DH gets transferred again, we may still have to pay double rents (or a mortgage and mortage, or mortgage and rent) for a significant amt. of time, due to getting moved after just re-signing a lease. (We don't get much notice for his transfer.)
--I would be able to do a lot of the smaller projects myself, because if we end up in a situation like we are now, I'll only be working part to 3/4 time. That time could get put to good use.

Okay, those are the major points I have been considering. This isn't anything that we have to decide today, but when it comes time to move in the next 6 months or so, I'd like to have a feel on whether we should hunt for a cheap rental or think about buying.

Feel free to ask me any questions! Obviously, we're very new to this! TIA!!

[villanelle75]

I'd buy in your situation, especially because you soudn liek ideal candidates for a modified flip. Because you ahve expert labor availabel for free, you can buy a lace that's livable but need work and fix it up over the course of your time there. Then if when you move, unless housing prices Totally tank, you'll be certian to make money on sale which will at a bare minimum ocver the cosign costs and mortgage fees, menaign you'd break even. And for more likely, you'll make money.

You'll also have the tax breaks for paying mortgage interest.

[Asha]

When I do mortgage calculators, our monthly payment would be $100+ less than our current rent (which is on the high-end of middle for our area). That would help offset some of the other expenses with home ownership (taxes, homeowner's insurance, etc).

keep in mind that though mortgage may be cheaper than rent, there are a ton of extra expenses that come with owning a home. our extra expenses are much more than $100/month.
some things we pay more for in a home vs renting
-heat (in nyc renters don't pay for heat but landlords do.)
-maintenance of home (roughly 1% of the value of the home each month)
-furniture to fill home (usually people get bigger homes when buying vs renting.)
-home owner's insurance

though, you do save money on taxes each month by being able to write off interest in taxes. though, since you will be paying about $60k for a house i can't imagine that you could write off very much in taxes.

[Lizard]

--In the area we'd be moving around in, you can usually (though not always) find a liveable fixer-upper for around 60K, sometimes less (one good thing about the midwest!).

The only thing with parts of the Midwest... it might take you FOREVER to re-sell that house once you need to transfer again. Especially if you do fix it up and re-sell it for a higher price than what might be customary for that area. My husband's folks live up in Northern Iowa, and houses up there are dirt cheap... 60K would get you a darn nice house. But, there are plenty of them that have been for sale over a year as well. :( I'd definitely try to do some research on the area you're going to be in, to see how the house market is.

[notkk]

I agree with Lizard that it depends upon the local market in the midwest, but from your earlier comment about the price of rent when you have a dog, it sounds like you will be in large enough city that you should probably be OK. I agree with villanelle75 that it sounds like you could do well with a modified flip situation, depending upon local market conditions.

I do not think that this statement is accurate at all:
-maintenance of home (roughly 1% of the value of the home each month)
Perhaps the PP meant 1%/year? 1% of our home's value would be upwards of $2K and we definitely do not spend that much on maintenance in a month! Additionally, this figure would vary substantially based on the price of your home and the amount of work that it needs. Even if it is supposed to be 1%/year, I don't think that it's a very useful guideline.

[Asha]

oops, i meant per year. we easily spent 1% of the value of our home last year. there are things that break that just need to be fixed. also, we are not handy so we had to hire someone for everything. we spent that much on necessary repairs and not cosmetic ones too.

yes, it won't be exactly 1% every year. some years it will be more and some will be less, it is just a rough estimate of the average in maintanance. also, it is always a good idea to have that much available in your budget so you are prepared for those unexpected surprises.

[ManteoChik]

I can relate to the rent/buy issue. We came to FL for a limited time and thought about this same thing. We decided to rent because we knew we'd only be here for about two years (we've already been here for one) and it seemed like everywhere we looked there were tons of homes for sale and nothing was selling....even the brand new constructions.

Yeah, it sucks renting because esentially all you are doing is paying someone else's mortgage, but we were worried that we wouldn't be able to sell when the time came. We rented an apartment at first to get a feel for the area, we signed a 1 year lease to begin with, but were relased early when we decided to look for a house to rent. We also have a large dog (black lab) and it can be frustraiting finding somewhere that will allow dogs. We looked for about a month before we found a place we were happy with.

I would research the area that you are moving too and get a feel for real estate in the area. Your agent will be able to show you a listing....and then tell you how long it's been on the market. That should give you an idea of what you'd be in for when the time came for you to move again.

[Smiley]

DH and I have owned 2 houses in the past 3 years and we're moving on to uur 3rd in the next few months. We feel that is is better to buy a house and build up that equity for even just a year. GL with whatever choice you make.

[laura]

We are in your situation, sort of, and we decided to rent. However, we moved to the SF Bay Area where you can get a nice fixer upper for about $600K vs. $60K. ;) If the housing market were different, we probably would have rented for a year and then purchased. The reason we didn't buy right away is that we weren't sure exactly where we would want to live, though as it turns out we love the town we rent in and we would buy here if we could easily afford it ("easily afford" being relative). When we moved we knew we would be here for a minimum of 3 years and that we would probably re-locate again at some point after that, though there always is/was the possibility we would love it here and not want to move. My husband's business partner and his wife moved here with us and they decided to buy right away. They lived in corporate housing (an extended stay hotel, actually) for 2 months while they house hunted, and then they moved right to their house. We considered that b/c the company paid for the temporary housing, but we never looked at this as a permanent relocation, so we decided to just find an apartment and live there instead.

In your situation, I would probably buy.

[Calla Lilly]

would your dh's company pay for any of the fees associated with having to move? sometimes a company will either pay the realtor fees and/or buy the house from you if it doesn't sell. also, what is the rental market like there? you could always consider renting it out and not selling once/if you move.

[MidwesternGal]

Thanks for the replies so far! I like to hear everyone's perspective--everyone has a slightly different take on it!

We are definitely looking into buying. Friends of ours are looking at a starter house for 58K and it barely needs anything done to it. However, it's in a small town that is only a 15 minute drive to a much larger one. (5,000 people compared to about 30,000). In that situation, DH and I would *probably* buy. Families would want to live in the smaller town and work in the large one.

But if we ended up in an area like we are now, I would rather rent--currently, we live in a college town (8,000 ppl), but it's kinda out in the middle of the interstate (the two larger towns are about an hour away on both sides). Therefore, if you live here, you work here, for the most part. I've seen houses sit on the market for a full year before selling.

So it really depends on which part of the state we end up in, and if we're near a bigger town that would attract more people to the area.

As for my DH's company, they give us approx. $250/week for up to 4 weeks in moving expenses. On top of that, they give us either $250 to do the actual moving ourselves or else they pay for a moving truck. Unfortunately, they don't do anything like pay realtor's fees or sell the house. . . . . or even pick up the rest of a rental lease. I wish they did, considering they are making us move!!


Again, thanks so far for the replies!! Any more insight would be welcomed!

[bookworm]

Others have mentioned the tax benefits to buying a home--I just wanted to point out that that's not necessarily the case, in a market with low real estate costs. You can take the interest (plus other deductions) OR the standard deduction. Depending on your other expenses, I suspect the standard deduction might be higher than the interest on a 50K mortgage.

[pookiebear]

I think a good rule of thumb is, if you can afford a down payment and the home is in a neighborhood in which the home will appreciate in value enough that you will make money when it is time to move then it is a good idea, otherwise renting may be a wiser choice.

[amorey]

One thing to remember is that selling a home can be expensive! How much more would a fixer-upper be worth after you fixed it up? It may not be enough to upset the costs of selling. If houses are only $60k, you may not be in an area that sees a lot of appreciation, especially since home prices are plateauing in many parts of the country. During the first years of your mortgage, you pay mostly interest and not principal. When you combine these factors, you may not have enough after you pay the realtor fees and closing costs. Our house costs much more than $60k, but we’re looking at losing $15-20k of our equity with realtor fees and closing costs. I know you can go FSBO to save your self some money, but it’s likely that you’ll still have to pay a commission to the buyer’s realtor.

[Hello Kitty]

Not that I want to discourage you from buying, but Amorey is absolutely right. I live in a small (3000 people) farm town in IL and houses appreciate very, very slowly. The only time they greatly appreciate is when they start out dilapidated and are overhauled - not just 'fixed' up.

Also, while FSBO is a great idea, I've found that people are very leary of it out here. Houses sell slow to begin with, but FSBOs sell more slowly. It's kind of interesting, but a house can be FSBO for several months and they finally give in and list it with a Realtor, and then it sells within a few months.

The other thing you want to consider is what time of year you would be selling - it seems houses really, really crawl here in the winter. Would you be able to afford to wait? Would you be willing to live awayfrom DH if you had to stay while the house sells?