Author Topic: Buying with the sole intention of selling  (Read 1655 times)

lwhorton

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Buying with the sole intention of selling
« on: January 21, 2015, 03:24:28 PM »
I'm looking for advice in terms of renting versus buying with the sole purpose of selling down the road. My wife still needs 3ish years to complete her PhD, but neither one of us want to live in the city after she finishes school. Our target rental properties in the area are $1100-1500 a month for decent 2-3 bedroom, 2-3 bath townhouses. 3+ years seems like a long time to keep renting, particularly when I have a high enough income to consider outright purchasing a home and paying down a mortgage that could be $400-1000 per month cheaper than the same rent.

After we decide to move, we could sell the property or begin to rent. We don't intend to remain close enough to manage the rental property ourselves, so that seems to point toward selling. Other than asking for general advice, I guess my question would be if this 3+ year block is too risky to decide to purchase a house with the sole purpose of reselling in such a short timeframe?

Many thanks.

arebelspy

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Re: Buying with the sole intention of selling
« Reply #1 on: January 21, 2015, 03:33:55 PM »
I wouldn't purchase one for such a short timeframe.  Transactional costs will kill you.

Run the numbers here:
http://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html

Unless you're buying it like a flip, and it needs a lot of work and you do that and fix it up.  That could work, if you have experience with it.
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Bobberth

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Re: Buying with the sole intention of selling
« Reply #2 on: January 22, 2015, 11:09:44 AM »
My first rehab was sold to a couple buying a house for their daughter to be in town for college.  It sat on the market a long time when it came time to sell.  Along with the lowering of the price and the 6% broker cost, they probably ended up breakeven at best.  I almost thought about buying it back to rent.

You might save money on a monthly basis with a mortgage payment, but the first 3 years of a mortgage are the worst for principal pay down.  Maybe average $200/month in principal pay down with a mortgage less than $1100 and that is $7200 pay down in 36 months.  How does that compare to 6% of your purchase price?  Add in other closing costs-fixing things, repainting, title fees etc and I don't think you come out ahead unless there is crazy appreciation.  Less money monthly yes, but there is a big expense waiting at the end.  Don't forget the headache of selling the house when you are ready to move and all that they housing market can throw at you.

Lots of people say that renting is "throwing money away" but I think in your case, renting is "buying freedom to move when it is most convenient for us".

Now if you can pull off a rehab while living there like arebelspy suggests, that sounds like a winner or if you really want a long distance rental, it could work out.  But otherwise, you're better off renting for such a short period of time.

Blindsquirrel

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Re: Buying with the sole intention of selling
« Reply #3 on: January 22, 2015, 04:39:56 PM »
 If you can get a foreclosure and rehab it yourself it might make sense.  Paying retail for a house and paying retail costs when you sell will take too huge a chunk of cash to make it worth while. Arebelspy is correct on tranaction costs. Probably not what you want for your first deal.