Author Topic: Buy vs rent question when even shortterm seems a breakeven?  (Read 1817 times)

ender

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Buy vs rent question when even shortterm seems a breakeven?
« on: January 30, 2016, 08:09:12 AM »
My wife and I live in a 1-BR apartment currently, but are looking to move in summer to a 2-3 BR apartment. Currently, our rent is about $800 but going up another $40/month, and most places in the 2/3 BR range in our town run $750-1000 pretty consistently. We want a bit more space as we both have hobbies which fit poorly in our single living room/office area. And have tentative baby plans in the next few years, too.

Previously we were not considering houses because:
  • The type of "we can see ourselves staying here for 20 years" places are $250k+ in this area, more than we can/want to afford now
  • We are not sure we will be in the area more than 2/3 years (we will have a better idea of this continuously throughout spring)

However, through our search we've seen there are a reasonable number of houses in the $120k-$150k range that sell around here, too, which would be comparable to what we want to rent (like a 3BR/1BA house, 2BR/1BA, etc). The NYT rent/buy calculator suggests that when comparing a $130k house vs renting two years a $927 rent as the "breakeven" point. Three years goes to $745. Four is $645. All those numbers are close to or lower than what we expect to pay in rent.

It is making me look into buying a small house that would be more than sufficient for many years instead of renting. Even if we move in ~2-3 years we would still be close to breaking even on a $130k place, apparently, and obviously the return gets better the longer we stay.

I'm curious what other folks would do in a situation like this or thoughts you might have. We weren't thinking about this option at all until stumbling on a house we would absolutely be interested in buying in that price range.

Gin1984

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Re: Buy vs rent question when even shortterm seems a breakeven?
« Reply #1 on: January 30, 2016, 08:14:58 AM »
Check what property taxes are.  In NYS my taxes were $2600 for a $60,000 vs Ca which was 1% of the purchase price.  That said, we bought in NYS when we only thought we would be there for five years because the mortgage ($475) was less than rent ($600). 

ender

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Re: Buy vs rent question when even shortterm seems a breakeven?
« Reply #2 on: January 30, 2016, 08:20:54 AM »
Check what property taxes are.  In NYS my taxes were $2600 for a $60,000 vs Ca which was 1% of the purchase price.  That said, we bought in NYS when we only thought we would be there for five years because the mortgage ($475) was less than rent ($600).

From what I gather, they are pretty close to what the calculator defaults to (I raised it a bit and the overall numbers didn't change too much).

SeanMC

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Re: Buy vs rent question when even shortterm seems a breakeven?
« Reply #3 on: January 30, 2016, 10:52:58 AM »
With a 2-3 time frame, I'd be overly cautious about expensive maintenance or repairs. Those calculators aren't figuring if you will need to replace roof, furnace, etc. - anything that a future buyer simply expects to work at that price point but is costly to fix if it goes. So I would want to have receipts and info on why none of that stuff is nearing the end of its life.

My other concern is how hot/cold the housing market is and if you are likely to be stuck with paying mortgage beyond your specific housing needs. Extra months of paying there and needing to rent elsewhere also can start wiping out the gains.

Ellsie Equanimity

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Re: Buy vs rent question when even shortterm seems a breakeven?
« Reply #4 on: January 30, 2016, 08:37:25 PM »
OP's wife here.

With a 2-3 time frame, I'd be overly cautious about expensive maintenance or repairs.

I think if we decided to buy, we would probably also be deciding to make the time frame 3-5 or more years. Still a possibly short time frame though. Possible repair needs are a concern I don't really know how to think about. How do you predict the unpredictable? What amount of risk is ok? At what time frame does it become less risky?

My other concern is how hot/cold the housing market is and if you are likely to be stuck with paying mortgage beyond your specific housing needs. Extra months of paying there and needing to rent elsewhere also can start wiping out the gains.

The housing market seems to be hot right now. I have no idea how you predict whether it will stay that way.