Long time renter- is it time for me to buy?

[mcneally]

My duplex rent is a great deal at $875.  My landlord hasn't raised the rent since I moved in several years ago and if/when he does, I'd be surprised if he did by more than $100. He's very risk averse and I'm a good tenant. But a nearly identical place a few doors down (different owner) is currently listed for $1250.

If comparing apples to apples, 'renting a single family house' vs 'buy of a SFH' is clearly in favor of buying, but I'm satisfied with the duplex, so my comparison has always been, 'rent my duplex' or 'buy a SFH', and I estimate the ongoing costs of a paid off house to be nearly as much as my current rent, so the answer has seemed to be clear that renting is better for me.

I'm targeting FIRE in 8 years, and I'm thinking that I probably want to buy something before FIRE. Seeing increasing prices makes me start to reconsider whether I should be buying sooner rather than waiting until right before FIRE (or trying to a forever renter).

Houses I'd be looking at will be somewhere in the low to high 200s. At $250k, I'd estimate monthly costs of

868 – loan estimating 3.25% & 20% down
275 – taxes
100 – insurance
150 – utilities*
250 – repairs & maintenance (I don't know how to do anything myself)
1,643  monthly cost of owning

*duplex rent includes water, sewer, trash; SFH gas/ electric will be higher, 150 is the estimated additional amount over duplex utilities

Finances
90k salary (Federal job)
30k cash
100k taxable brokerage (all VTSAX)
20k I-bonds (that I just bought so I can't withdraw for almost a year)
160k Roth
510k 401k
parents would lend for down payment if I asked
 
Other thoughts:
*I'm single. It's possible I won't be forever and moving in with a partner has a high chance of meaning selling the house. Selling houses is expensive. I do want too stay in this metro probably forever, but I'm open to moving 20 minutes away. (I don't want kids, so planning for that in house size is unnecessary).

*I have a friend who has said he might want to live in a duplex I own. I would love this, but I don't know how serious he is/ committed to staying. I probably don't want to go this route unless he would at least commit to three years. Not that I'd sell if he then left after three years, but I'd have a better idea of what I'm dealing with. Duplexes like the one I rent have gone for upper 300s recently.

*If I just want to lock in a price, there are condos nearby that go for ~$190k with $230/mo HOA. However, this seems like a downgrade since they are a little smaller than what I have now and I wouldn't have the basement storage where I currently have a gym setup and keep my bicycles.

Should I keep renting as long as it remains such a good deal? Start looking to buy a house now? Wait a few years before I look to buy a house?

[Freedomin5]

If you anticipate rising prices, and you know you eventually want to buy, I'd start looking. You could always do what my tenant is currently doing. She rents my 1-bedroom condo (and pays way below market rate for it). She bought a townhouse and rents that out. Her tenant covers her mortgage and costs of owning the townhouse. When she is ready to get married and needs more space, she plans to stop renting my condo and move into her townhouse. By that time, her tenant will likely have helped her pay off a chunk of her mortgage.

[six-car-habit]

 Are you wanting to buy a SFH because;
- you don't want to miss out on the future price appreciation if you buy relatively soon, or
-  the 'entry fee' and overall cost is likely to be $100K+ higher in 7-8 years, or
- you actually want to have a place where you are free from landlord constraints, can customize, pride of ownership, willing to call the fix-it guy-or DIY, etc. ?

  It's possible you meet someone who'd love living in your house, versus theirs, so you shouldn't equate that with needing to sell. You could keep it and rent it out, otherwise.

 I wouldn't buy a duplex based on a friend's comment, and asking him to lock in for 3 years could be tricky, especially if he's a good friend but turns out to be a bad neighbor.  I rented 1/2 a 'duplex' that i owned to a friend for awhile. Everything was good mostly, then he lost his job, not his fault, but i felt compelled to let him slide on the rent until he found steady work. About 3-4 months worth. After which he did find work- and he repaid the backrent as agreed and on time. [ But probably an outlier case that he was prompt in repayment.]

  If you buy a local condo you not only lock in the price, but lock in the lifestyle - which you seem satisfied with. I'd say at least find a condo that has room to store your sports/ outdoor equiptment, even if it costs more.  Seems like you have plenty of income and assets to back up getting a mortgage if you really would rather be a homeowner though. 
- 

[Dr Kidstache]

Are you familiar with the NY Times Rent vs Buy calculator? It's pretty detailed so you could try out a range of scenarios to see just the math of the situation in more detail.  https://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html
I'd happily have rented forever because I'm not someone who feels great about maintaining a home but got pushed into buying due to increasing rent (~50% increase if I stayed; it listed for ~75% increase once I moved out). In my case, that calculator says that my break-even point for the house I just bought is somewhere in the 3-5 year range versus continuing to rent.

[mcneally]

Are you wanting to buy a SFH because;
- you don't want to miss out on the future price appreciation if you buy relatively soon, or
-  the 'entry fee' and overall cost is likely to be $100K+ higher in 7-8 years, or
- you actually want to have a place where you are free from landlord constraints, can customize, pride of ownership, willing to call the fix-it guy-or DIY, etc. ?

I'd state it as wanting to avoid the higher entry fee in 7 years rather than trying to capture appreciation now, buy that's my primary concern. It's probably not a great idea to go into FIRE as a renter, at least not unless you're pretty flexible about where to live. There is a fairly small area of the city I'd prefer to live in. It's not necessarily the trendiest or appreciating faster than the rest of the city, but I'd rather not get priced out of the area (I said I might move for a partner, but I wouldn't choose to on my own).

Not really interested in home improvement projects. The main upside of SFH besides space is noise. My current building has no soundproofing and the floors are creaky in spots. I'd get a nice home theater system in a house. Also this sounds trivial, but I'd like to have a treadmill that I can't have currently. My favorite form of cardio is walking at a steep incline with a weighted backpack.

If (when) I buy, I want the place to be something I'd be happy living with a partner in. For me this means a workout area & bicycle storage and a place I can set up a large desk for working from home. I'm thinking I want a 2nd bedroom that could potentially go unused by me that a partner could use as a home office or whatever else she wants. I'm not sure if all of that is possible in a condo, at least not in the area I'm looking.

It sounds like I'm trying to justify buying a house now and seeking approval, but being responsible for repairs and maintenance still scares me. I'd also be doubling my monthly housing costs from what I currently pay.

ETA: I also have the impression its not uncommon for buyers to waive inspections and basically a given that sellers won't repair anything found right now with how little supply there is. That may be a good argument in favor of waiting a year or two anyway.
 

[LightStache]

I would keep renting in your situation. You have a good deal and that allows you to save money, immediately and with short-term certainty.

If you buy a house, you'd be giving that up with the assumption that real estate appreciation and principal accumulation would outweigh the benefit of your below-market rent. Even if you were at market rent, the analysis could still lead you to the same conclusion.

But I also wouldn't fault you for buying if you value the peace of mind that owning provides. There's definitely intangible value in being able to do what you want, predictability of future costs (which you say you're worried about), and knowing you'll have a specific home in the far future.

You're also in a LCOL area and your time horizon is long, so if home prices take a dip after you buy, it probably won't make a big difference for you long term.

So you could really go either way depending on how much you weigh the intangible benefits of owning.

[Dicey]

Longtime homeowner here. Also own multiple SFH rentals. If you can save and invest with discipline, renting is the way to go for now.

[Anon-E-Mouze]

It sounds like you have a pretty good situation right now as a renter, except for the inconveniences of not being able to have a treadmill and some noise issues. If I were in your position, I wouldn't be looking to buy anything right now.

However, you might find it worthwhile to invest some time educating yourself about (or doing a deeper dive than you have done) about the housing market in your town and preferred neighborhood (and maybe a couple of up-and-coming neighborhoods). Go to actual (or virtual) open houses for houses that are approximately what you're looking for and in a range that goes somewhat above and below what you'd be willing to pay. (For example, if you want a 2-bedroom house likely in the $200-250K range, look at 1-3 bedroom houses in the $150-500K range.) Educate yourself about the realtors, read inspection reports, invite a knowledgeable friend or relative along on some of the open houses, etc. Learn about renovation costs. Check out the commutes and other issues. Check out houses in neighborhoods that aren't on your preferred list but nevertheless might be worth considering. Keep records of things like asking and final selling price, copies of the brochures, features you like and don't like, areas of concern in inspection reports, etc.  Also look around in the neighborhoods at houses that aren't for sale but that you really like - note their addresses and add them to your file. If you have friends or family in the town who have hired people for constructions or renovation, get their feedback and prepare a "hire" and "don't hire' list.

Then, if and when the time comes, you'll be in a better position to move quickly and confidently if you see a house that suits your needs and is priced right.

[FINate]

... I estimate the ongoing costs of a paid off house to be nearly as much as my current rent ...

This is an easy one: Keep renting! I mean, it's your money, if you want to do the equivalent of putting thousands of dollars through a shredder every year that's your prerogative.

Also, there's nothing wrong with going into FIRE as a renter. Instead of having a large amount of your NW tied up in real estate, you'd own more assets like equities that generate growth and income used to pay rent. It's all fungible.

If you're worried about getting priced out in the future then it may make sense to buy and lock in a cost of living. But this also means you're potentially stuck there for the long-term, responsible for repairs and taxes, and RE transaction costs. Oh, and if prices decline (as happened not that long ago) you may be underwater for a time. Just be sure you want to put down roots long-term and are okay with the loss of flexibility and the responsibilities of home ownership.

[Rdy2Fire]

I'd continue to rent; I own my home with no mortgage and at times wish I never bought my house. I think given your current rent you should stay where you are and invest the difference in what you believe would be your monthly costs if you purchased. In the long run you'll be much happier making the money on the investment that way then owning a home IMO

[mcneally]

I will plan to continue renting for now. I'll reconsider if rent is ever raised significantly and I still think I want to buy something before I would quit my job, but that is several years away. 

[FLBiker]

I will plan to continue renting for now. I'll reconsider if rent is ever raised significantly and I still think I want to buy something before I would quit my job, but that is several years away.

I'm glad to see you came to this conclusion.  Personally, if I were single, I'd happily FIRE as a renter.  If I didn't have a kid, I don't think I'd want to own a home.  DW might disagree, though, so I might still own one. :)

[DaTrill]

A lifelong renter and 2x-3x better of financially from this decision.  Too many things can change that make a location go from ideal to a nightmare to motivate me to buy.  I look at Naples Florida, until the "Red Tide" ruined the beach in the summers and who knows if/when it will come back (due to release of bad water from Okeechobee). 

[chemistk]

Glad you decided to keep renting, a lot of people would love to be in your situation.

The market maybe crazy right now, but who knows what it'll look like in 5-7 years. Sock the cash away even if you seen an increase in your rent, and when the time comes to move into something bigger, you can start looking then.

Like Freedomin5 said, the one situation where you could buy a house is if you rent it out "at cost" for the next few years, but that ultimately depends on tour tolerance for being a landlord.

[ryan_themoneyguy]

It sounds like owning is a rather new consideration and that you really love your current situation. If that's the case, it's a good idea to stay where you are but keep tabs on the market consistently. The more you look now, the more you'll know what you want when you're ready. Plus, you'll give yourself more time to build up savings for the down payment, decide if you want to become a landlord, whetherr you want to move in with an S.O., and choose an optimal location.