The usual rent vs. buy debate, with a twist

[irishbear99]

My husband and I just moved from one state to another for my job, and we're going through the typical rent vs. buy discussion. I think we're pretty solidly in the "rent for now" camp, but I wanted to run the situation by some impartial people to see if our logic is sound.

Background: Hubs and I have a history of moving around every 4-6 years. Five years ago, we moved from State A to State B for my job. State B was beautiful, and we liked it quite a bit. We thought we might be done roaming the world and it would be nice to put down roots. So, we bought a place. Fast forward 5 years, turns out we're not done roaming. Got a job offer I couldn't refuse, so we sold the house (luckily, for a tidy profit) and moved back to State A.

Reasons to rent: We really thought we were done moving last time, and it turns out we were wrong. And, I'm not so sure that we're done now, even though we love the city we're living in. We could end up being here a long time...or not. I owe my employer 12 months of service for the move (they paid). After that, anything is possible. Also, the housing market in our current city is very different. Our home value in State B rose more than 30% in 5 years. I'm pretty sure we can't expect anything like that here; so if we bought and then decided to move in four or five years, a profit is definitely not guaranteed.

Reasons to buy: Rents are pretty high, and rental availability is tight. We could easily buy a place equivalent to what we're renting for less per month (to the tune of maybe $400 or so). Also, as part of my move package, my work will pay for some of my closing expenses if we buy within one year (would probably be a $4-$5k value). If we don't buy within that first year, we forfeit the benefit.

I keep thinking that our future uncertainty makes renting the smart option for now. We can always buy in the future if the situation changes. But then I keep coming back to that benefit we'll lose and question our decision. So, as I said, I wanted to run this buy some neutral 3rd parties and see what you all here think.

[rubybeth]

I'd probably wait until closer to the end of the year, after you've had more time on the job to decide if it's something you can at least picture doing for at least five years. The offer is still good for some closings costs in the 11th month as it is in the 2nd month? So no rush is required. But you can give yourself at least six months of the job and living there to decide, and  you can look at real estate listings during that time to see what's out there and if you think it would be worth it.

I'd likely err on the side of renting, because I like the flexibility, but I can understand not wanting to leave money on the table if you end up staying there for some time.

[norabird]

Covering closing costs is a nice benefit, plus you'd save on rent, so it doesn't seem like it would hurt to buy so long as you find a place that should be able to re-sell easily.

[Jack]

Are you interested in real estate investment? If so, buy, but choose a place based on its viability as a rental property rather than just picking something you'd like to live in yourself.

[MandyM]

Have you seen this: http://jlcollinsnh.com/2012/02/23/rent-v-owning-your-home-opportunity-cost-and-running-some-numbers/

Its a bit lengthy, but a good discussion, IMO. The closing cost benefit throws another wrinkle into the math, but I think people forget or disregard the costs of home ownership.  Plus, consider the possibility that the closing cost benefit may simply skew your purchase budget higher.

[irishbear99]

Thanks for your thoughts.

I'd probably wait until closer to the end of the year, after you've had more time on the job to decide if it's something you can at least picture doing for at least five years.

Good point that we don't have to make a decision right away. We're already 4 months in, so that means we still have 8 to decide. The problem isn't whether I can picture doing this for five years. It's more along the lines of whether a great opportunity pops up in an area we want to move to, which can happen at any time. Specifically, we'd still like to do a stint somewhere in Europe, and there's no telling when the opportunity to do so might arise.

Are you interested in real estate investment? If so, buy, but choose a place based on its viability as a rental property rather than just picking something you'd like to live in yourself.

Managing a rental property just isn't for us. Plus, we'd be absentee landlords (since if we did move, it would be out of state), and we'd have to hire a property management company. I would be okay with that, but my husband is much more conservative than I, and is not willing to entertain the idea unless there was no other choice.

Covering closing costs is a nice benefit, plus you'd save on rent, so it doesn't seem like it would hurt to buy so long as you find a place that should be able to re-sell easily.

That's the only problem. How does one know whether and when a place would re-sell easily? There are too many variables to predict this.

Have you seen this: http://jlcollinsnh.com/2012/02/23/rent-v-owning-your-home-opportunity-cost-and-running-some-numbers/

Its a bit lengthy, but a good discussion, IMO. The closing cost benefit throws another wrinkle into the math, but I think people forget or disregard the costs of home ownership.  Plus, consider the possibility that the closing cost benefit may simply skew your purchase budget higher.

Neat concept. I ran the numbers they suggested, and we end up in the "toss-up" range. When you add in maintenance/etc., I think it probably moves into the "renting is better" category.

I think the bottom line is I'd really kick myself if I had to turn down an opportunity because we couldn't sell our house. I think, for now, renting is the way to go.

Thanks.

[Jack]

Are you interested in real estate investment? If so, buy, but choose a place based on its viability as a rental property rather than just picking something you'd like to live in yourself.

Managing a rental property just isn't for us. Plus, we'd be absentee landlords (since if we did move, it would be out of state), and we'd have to hire a property management company. I would be okay with that, but my husband is much more conservative than I, and is not willing to entertain the idea unless there was no other choice.

That just means you'd run the "is this a good rental?" numbers with the assumption of third-party management. Some people invest in those sorts of "turn-key" rentals on purpose, so IMO you (or more precisely, your husband) should not dismiss it out of hand.

While hiring a property manager does imply higher cost compared to managing it yourself, all that means is that you have to find a more profitable property to compensate. Such a property might be harder to find, but that's no problem because even if you fail, it just means you pick the option you were considering anyway (i.e., not buying at all). There's no downside to trying.