Author Topic: Is this rent-vs-buy decision as complicated as we are making it?  (Read 9893 times)

sbzellison

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Well, Mustachians, I need some top-quality, talk-me-through-this advice.  My fiance and I are in the middle of a big old life transition up to Alaska (I am already here, he is coming up in September), and have been discussing buying a house since last February.  We were mostly committed to the idea and had already made significant progress in that direction when interest rates jumped in June, throwing us into doubt again.  Please, help us decide if this is a good idea!

Here's our sitch, in brief: We are a 26 and 27 y/o Mustachian couple considering (faaaar from decided yet) buying a house in Anchorage with full knowledge that we may move away in 3-5 years.  I am up here getting paid to get my MSc in Biology from UAA, and it's quite likely that after I've graduated in May of 2015, the best (read: highest paying and most challenging) jobs in my field will still be in Alaska, making Anchorage as a home base a rather good choice.  HOWEVER, my fiance, with whom I would be potentially buying said house, is in the nascent stages of his career as a law enforcement park ranger--a career which will likely take place mainly in the lower 48.  We are OK with being apart for the field season (it's been our M.O. for our entire relationship; hell, we met in the field!) but within the next 10 years, our goal is to have fulfilling, high-level positions at least within the same region (I know, dream big!!). 

So.  We're making our life up here, at least until the end of 2015.  We're going to need some sort of pad, as this "livin' on the road is gettin' kindof old".  Rent for a place within bike/ski commute of the University, and one in which we would be happy to spend the first two years of married life, will likely run us $1400 in Anchorage, utilities included.  Mortgage, taxes and insurance on a $200,000 house with a full 20% down payment to avoid PMI is $1250, even with the higher interest rate of 4.5%.  A decent condo, which we could probably find for $160,000, is an alternative but less attractive option, as I am really not interested in paying HOA dues of $150-300/month (though this could potentially be made up for by the increased ease of renting/selling the condo in a few years, which everybody keeps telling us about).

We can certainly afford a $1250/mo payment, even with him working seasonally and me making pittance as a grad student.  Our expenses ran ~$1500/mo in the lower 48, and even with higher cost of living, will likely be around that up here, but unfortunately they vary a lot due to our seasonal, unpredictable lifestyle (we're working on stability!).  We have no other debts.  We have enough cash for the $45,000 downpayment/closing fees, plus a $10000 liquid asset cushion.  I have $30000 in a Roth IRA, he has $15-20000 in another.  Thank you, Mustachian-minded parents, for instilling in me the virtue of frugality!

I am not listing our monthly income because, frankly, we don't know it yet, making our calculations a little tricky.  Our money-making season was May-September, when we both work mad overtime and bring in gross ~$6500 a month at the high end.  I use the past tense because, with me in grad school, we gross less, probably $4500/month, during the field season.  I will earn $1300/month for October-May, and he is planning to get a job in Anchorage during the winter--this is our big wild card.  However, due to our extreme savings rate during the summer (both being far out in the backcountry, we 'stache away ~80% of our net income), regardless of how much money he brings in, we could live on my income alone plus drawing down our savings ~$1500/month.  All of our calculations for monthly expenses etc etc have been on the highly conservative side, and we still come out with being able to afford the house for years to come, even without fiance working during the winter (though potentially with reduced contributions to my Roth IRA, which currently have been at $5000/year). 

Another big reason for wanting to buy the house is wanting a place to park our money besides the stock market.  If I don't spend that $45k on a downpayment, I need to put it somewhere else sooner rather than later, and I would be hesitant to pour it into the stock market/lending club/wherever, as these investments are feeling increasingly less real to me.  Another variable: in addition to that big chunk o' change, fiance is due a big cash influx due to a worker's comp payment resulting from a big ol' epic almost-life-ending accident that happened on the job two years ago.  Amount and timing of payment TBA, depending on government bureaucracy etc, but it's gonna need to go somewhere, sometime.  We haven't included it in any of our budgeting, but I have been enjoying an "eventually this will happen, so it will ease the strain on our budget" mindset.

So.  To rent, or to buy?  We can afford either, and are looking for an investment, but...is this the right one to continue down the road toward FI?

Also, is this decision as difficult for everybody?  I feel like it's getting a little complicated in here.

Another Reader

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Re: Is this rent-vs-buy decision as complicated as we are making it?
« Reply #1 on: August 15, 2013, 02:11:44 PM »
1.  NEVER, ever buy a house with a partner to whom you are not married.  It's a recipe for disaster and has been discussed at length in several threads.

2.  It's kind of a moot point, because you are not likely to get a loan without substantial, stable income.  Lenders will roll their collective eyes at what you describe.

3.  You compare a $1,250 mortgage payment with a $1,400 rent payment including utilities.  You have to pay utilities on anything you own.  Plus you will have to fix things as well.

4.  You are as likely to lose money on a house as you are to make it in two or three years.

5.  The selling costs if you move are typically 7 to 10 percent of the sales price.  If you have to move in two years, you will almost certainly lose money.

Get your degree, get permanent jobs, get married.  Then consider buying a house.

velocistar237

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Re: Is this rent-vs-buy decision as complicated as we are making it?
« Reply #2 on: August 15, 2013, 02:22:40 PM »
The rule of thumb I've heard is 5 years minimum, but you can check a buy vs rent calculator. For short periods, transaction costs make buying more expensive.

Your residence is an expense, not an investment, unless you go in having decided that it makes sense for you to become a landlord after you move out.

If you really, really want to own a house, then go ahead, but it sounds like you would be better off renting. Renting is great in a lot of ways.

I was a die-hard renter. Then the market tanked, and we found a place for a reasonable price, and we bought it. We plan on staying for at least 10 years. If the price hadn't been right, we wouldn't have bought (and I wouldn't be spending all my time thinking about how to fix my house).

KingCoin

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Re: Is this rent-vs-buy decision as complicated as we are making it?
« Reply #3 on: August 15, 2013, 02:26:24 PM »
To me this seems like a pretty obvious "rent".  Given your uncertainty about the future (incomes, long-term job locations, and even potentially the kind of place and location you want to live within Anchorage), you benefit greatly from the flexibility that renting affords. If rent was north of 1%/mo of purchase price, it might be worth the hassle to buy, but if you can rent a ~$200k place for $1400 including utilities, that's not a bad value proposition.  Even if you can afford to buy, it seems like that would be more of a visceral choice than a sensible one.

If much of your decision to buy stems from your trepidation about traditional investment vehicles (stocks, bonds, REITs), I'd suggest you try to get over it. Better now than when you've amasses a few hundred grand and the prospect of plowing it into the market seems even more daunting. You can put the money to work over a period of a year or two if you're worried about short term volatility.

ender

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Re: Is this rent-vs-buy decision as complicated as we are making it?
« Reply #4 on: August 15, 2013, 07:44:20 PM »
I see literally nothing which makes buying a good decision as 100% of what you have written is absolutely a "rent" outcome.

Am I missing something? Why do you think buying is a financially wise decision?

brandino29

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Re: Is this rent-vs-buy decision as complicated as we are making it?
« Reply #5 on: August 15, 2013, 08:48:07 PM »
I agree with the other posters here, renting sounds like it's by far your best option.  Tying yourself up in a home with nearly all of your liquid assets and uncertain incomes is a huge gamble.  You'll enjoy yourselves much more without the stress and hassle of home ownership.  On the flip side, if after your first year or two you discover that a) you like it there b) you will or could be there longer than 3-5 years and c) you are still interested in buying a home, you'll know the city much better and where you might want to live and what reasonable prices are. 

A good friend of mine moved there and bought a new place about a year ago, I'll just say it is hella more expensive than I ever realized.

1.  NEVER, ever buy a house with a partner to whom you are not married.  It's a recipe for disaster and has been discussed at length in several threads.

Finally, I just want to say I completely disagree with this.  Marriage schmarriage, half still end in divorce and that would just make it that much harder to deal with separating.  If you know ya'll are both in it to win it (and I firmly believe all couples truly know deep down if they're really going to be together for the long haul, through the good and through the ugly), then a piece of paper filed down at the courthouse makes no difference. 

sbzellison

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Re: Is this rent-vs-buy decision as complicated as we are making it?
« Reply #6 on: August 16, 2013, 12:46:36 AM »
Woah, woah, woah!  I did not expect to be made to feel such an extreme idiot for even asking this question.  I wouldn't be here, after months of browsing the MMM blog and forums, asking this question, if I didn't have very good reasons for proposing to buy!  I realize our financial situation is complicated and unusual, and our lifestyle is difficult to understand and plan for when framed in a format such as this.  Obviously I didn't explain myself clearly enough or give enough details.

But before I dive into the details, I want to express that I am actually offended by Another Reader's point-blank dismissal of my relationship with my fiance.  Thank you, brandino, for coming to the defense of committed couples-that-happen-to-not-be-married.  It bothers me that "it has Been Discussed At Length in these forums" apparently offers carte blanche for very rudely dismissing an alternative (though hardly a minority) lifestyle.  For the record, we committed first (years ago, sometime after that nearly-life-ending accident I referenced, but before I dedicated nine months of my life to his recovery and standing by his side while he relearned how to walk, run, ski and climb), and then began discussing buying a house and only now, after the important stuff is out of the way, are working on throwing our families a party to celebrate our commitment.

(Also, on a more minor point, I misspoke--rent up here is likely to be $1400 without utilities on a house worth $200,000.)

I only started researching buying a house when I stumbled across a rent or buy calculator (the one at MSN money--http://money.msn.com/home-loans/rent-or-buy-calculator) which said that, even with conservative assumptions (monthly rent of $1200, annual inflation of house 2%, moving in three years), buying still comes out $8,000 ahead.  Right, I know, not enough to make it worth the hassle or risk, but--like I said, conservative assumptions, and the possibility (likelihood?) of living here longer only increases the savings associated with buying.  With more data-driven assumption, and increasing the big guess factor of how long we'll live in Anchorage to 6 years, buying puts us ahead $45,000.

In another attempt to prove my non-idiocy, I'd like to discuss the rest of the research I've been putting into this idea of mine.  We've visited two lenders, and have received pre-approvals from both (so you're wrong on point 2, Mr. Reader).  I have been looking seriously at the housing market in Anchorage since February, and less seriously for almost a year.  I've toured many a home, and am getting a good sense of what's a good deal and what isn't.  I well know the two neighborhoods in which it would make sense to buy, having taken nightly walks around them when I am not in the field.  And, I've lived in Alaska for a cumulative nine months now, and have figured out that it is just as possible to live a frugal lifestyle up here as down South.  I am not going into this blindly and "viscerally"--though obviously my emotions are having some effect on my decision making, else I wouldn't be here being rather brutally berated by you folk.

And for my next trick, I will attempt to contextualize why it might (just might--despite my rigorous defense of my ego, I'm still undecided) make sense to take this risk anyway.  The thing is, with our lifestyle, it will take us at least a decade before we can make a better guess about our mid-term future than we can now.  Knowing that I will be working here for the next three years, and that I will be most likely to get a permanent job in 2016 in Alaska, is the best window into our future that we've had since 2010.  I strongly feel that the alternative--waiting until we "know" in what city we're going to live--would put us reconsidering buying a house in more than quite a few years, when the market and interest rates will certainly be much less favorable for first-time homebuyers.  And, crucially, it as likely that we will stay in Anchorage for a decade as move in three years.  To me, starting careers in our field, it truly doesn't seem like a "now, or wait a year and see" sort of choice.  It seems more like a now, or miss the window for up to a decade and then hope that the housing market is as favorable as it is currently.

And this is what I need your advice on--whether or not taking this epic risk might make sense given our currently happily nonmarried, thankyouverymuch lifestyle.

englyn

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Re: Is this rent-vs-buy decision as complicated as we are making it?
« Reply #7 on: August 16, 2013, 02:41:11 AM »
Um, what? I didn't see anyone trying to make you feel like an extreme idiot. While I totally disagree with AnotherReader's point about buying a house while unmarried (having done it myself without being engaged yet even and 4 years later it's turning out great, and we're now married; then again Australia legally treats married and defacto couples the same) it wasn't exactly a personal insult. The rest seemed fairly sensible advice - bluntly spoken, possibly, as that's the custom on this forum.

What were your assumptions of transfer costs on the house? Did the rent-or-buy calculator take in possible gains on your investment if you put your money into things other than a house?

It is indeed a complicated subject.

ace1224

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Re: Is this rent-vs-buy decision as complicated as we are making it?
« Reply #8 on: August 16, 2013, 05:26:56 AM »
i would vote rent especially if you don't know if you're going to stay in the area.  and this is from someone who owns a house with her baby daddy of ten years, all of which have been unmarried... ;)

Rural

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Re: Is this rent-vs-buy decision as complicated as we are making it?
« Reply #9 on: August 16, 2013, 05:29:43 AM »
I'm going to come down on the "rent" side, too, and add that you should consider the added stress of first-time home ownership while starting a grad program, and while living in and maintaining the home solo during the field season. I think your life will be better for the next two years in a rental, frankly.

Rebecca Stapler

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Re: Is this rent-vs-buy decision as complicated as we are making it?
« Reply #10 on: August 16, 2013, 05:59:29 AM »

1.  NEVER, ever buy a house with a partner to whom you are not married.  It's a recipe for disaster and has been discussed at length in several threads.

Finally, I just want to say I completely disagree with this.  Marriage schmarriage, half still end in divorce and that would just make it that much harder to deal with separating.  If you know ya'll are both in it to win it (and I firmly believe all couples truly know deep down if they're really going to be together for the long haul, through the good and through the ugly), then a piece of paper filed down at the courthouse makes no difference.

That piece of paper may not make a difference to the couple's relationship, but it makes a helluva difference when purchasing real estate. Divorce aside, if one person died, their family could move in or force a sale (or prevent a sale) of the home.

KingCoin

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Re: Is this rent-vs-buy decision as complicated as we are making it?
« Reply #11 on: August 16, 2013, 07:08:43 AM »
To be clear, I don't think buying is crazy (or certainly idiotic - I think you read people's opinions a little too personally). The NYT rent/buy calculator puts your break-even at about 4-years which sounds about right:
http://www.nytimes.com/interactive/business/buy-rent-calculator.html

The thing these calculators don't take into account is the time it will take you to buy, sell, and maintain a home as well as the flexibility renting gives you. I've always found it incredibly liberating to know that I can pick up and move at almost any time as demands of lifestyle and geographical location change.

Undecided

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Re: Is this rent-vs-buy decision as complicated as we are making it?
« Reply #12 on: August 16, 2013, 11:55:24 AM »

1.  NEVER, ever buy a house with a partner to whom you are not married.  It's a recipe for disaster and has been discussed at length in several threads.

Finally, I just want to say I completely disagree with this.  Marriage schmarriage, half still end in divorce and that would just make it that much harder to deal with separating.  If you know ya'll are both in it to win it (and I firmly believe all couples truly know deep down if they're really going to be together for the long haul, through the good and through the ugly), then a piece of paper filed down at the courthouse makes no difference.

That piece of paper may not make a difference to the couple's relationship, but it makes a helluva difference when purchasing real estate. Divorce aside, if one person died, their family could move in or force a sale (or prevent a sale) of the home.

Sorry, but how they hold title to the property (and, if applicable, to whom the leave their divided interest in the property), is what matters for that, not whether they're married.

brandino29

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Re: Is this rent-vs-buy decision as complicated as we are making it?
« Reply #13 on: August 16, 2013, 12:04:59 PM »

1.  NEVER, ever buy a house with a partner to whom you are not married.  It's a recipe for disaster and has been discussed at length in several threads.

Finally, I just want to say I completely disagree with this.  Marriage schmarriage, half still end in divorce and that would just make it that much harder to deal with separating.  If you know ya'll are both in it to win it (and I firmly believe all couples truly know deep down if they're really going to be together for the long haul, through the good and through the ugly), then a piece of paper filed down at the courthouse makes no difference.

That piece of paper may not make a difference to the couple's relationship, but it makes a helluva difference when purchasing real estate. Divorce aside, if one person died, their family could move in or force a sale (or prevent a sale) of the home.

Getting married just to buy a house would be pretty silly, just like buying a house only because you're married would be.  None of those are mutually exclusive.  Sure, problems can arise if you're unmarried, just as likely as they are to arise if you are married.  Just like you shouldn't buy a car based on what you may need it for the 1% of the time ("I totally need 4 wheel drive, what about if I ever need to go offroading in the snow?"  "Dude, you live in Miami"), you shouldn't base a big decision on the off-chance you may die and your partner and your family will butt heads in the aftermath.

SBZ, sorry you felt you were being attacked, but I second the notion that you shouldn't take it personally.  I had a similar feeling after my very first post as well but realized it was just people assessing my situation from a different perspective---which is the reason we all Ask a Mustachian anyway. 

If you decide to buy, I think the most important thing is just to ensure you're spending the least amount possible and not rush into a purchase for the 'perfect' home.  Obviously it's a recurring theme in MMM but living well below your means makes everything easier, and if your situation changes and you end up moving and have to sell earlier than you expected, you'll be thankful you went for the more practical house or condo. 
 

Rebecca Stapler

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Re: Is this rent-vs-buy decision as complicated as we are making it?
« Reply #14 on: August 16, 2013, 12:06:16 PM »

1.  NEVER, ever buy a house with a partner to whom you are not married.  It's a recipe for disaster and has been discussed at length in several threads.

Finally, I just want to say I completely disagree with this.  Marriage schmarriage, half still end in divorce and that would just make it that much harder to deal with separating.  If you know ya'll are both in it to win it (and I firmly believe all couples truly know deep down if they're really going to be together for the long haul, through the good and through the ugly), then a piece of paper filed down at the courthouse makes no difference.

That piece of paper may not make a difference to the couple's relationship, but it makes a helluva difference when purchasing real estate. Divorce aside, if one person died, their family could move in or force a sale (or prevent a sale) of the home.

Sorry, but how they hold title to the property (and, if applicable, to whom the leave their divided interest in the property), is what matters for that, not whether they're married.

I don't know AK real property law, but in some states there is a title status only available to people who are married. To get around this barrier the OP can have an attorney draft a constellation of documents that will allow them the same benefits of joint ownership that married couples have.

Undecided

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Re: Is this rent-vs-buy decision as complicated as we are making it?
« Reply #15 on: August 16, 2013, 12:28:03 PM »

1.  NEVER, ever buy a house with a partner to whom you are not married.  It's a recipe for disaster and has been discussed at length in several threads.

Finally, I just want to say I completely disagree with this.  Marriage schmarriage, half still end in divorce and that would just make it that much harder to deal with separating.  If you know ya'll are both in it to win it (and I firmly believe all couples truly know deep down if they're really going to be together for the long haul, through the good and through the ugly), then a piece of paper filed down at the courthouse makes no difference.

That piece of paper may not make a difference to the couple's relationship, but it makes a helluva difference when purchasing real estate. Divorce aside, if one person died, their family could move in or force a sale (or prevent a sale) of the home.

Sorry, but how they hold title to the property (and, if applicable, to whom the leave their divided interest in the property), is what matters for that, not whether they're married.

I don't know AK real property law, but in some states there is a title status only available to people who are married. To get around this barrier the OP can have an attorney draft a constellation of documents that will allow them the same benefits of joint ownership that married couples have.

A married couple may hold title as tenants in the entirety or by some other presumptive form that transfers to the survivor (e.g., joint tenants with right of survivorship, where it still exists), although even then I don't think every state presumes a married couple's "joint" title to take that form. Some states also permit JTWRS between married or unmarried persons, but I don't think Alaska does. Obviously, as with any couple they should take steps to see that their assets will be treated appropriately if one of them dies or becomes incapacitated, but your presumption is baseless, and referring to a "constellation of documents" doesn't really make it a major challenge. So as a reason not to buy property together, the legal status of married or unmarried isn't a significant factor (in any U.S. state, as far as I know, although there may be other places in the world where it is).   

velocistar237

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Re: Is this rent-vs-buy decision as complicated as we are making it?
« Reply #16 on: August 16, 2013, 01:40:49 PM »
I plugged the numbers into the NYT buy vs rent calculator before my last post, and I got 3-4 years break-even. I still lean toward renting.

Do you have a reason to think it's now or never? Is Anchorage gentrifying like crazy or something?

it as likely that we will stay in Anchorage for a decade as move in three years.

Your payoff would need to account for the likelihood of these different scenarios.

E(buy) = E(buy & move) * P(move)+E(buy & stay) * P(stay)
E(rent) = E(rent & move) * P(move)+E(rent & stay) * P(stay)

You can break them down further (e.g., into years) if you want. Pick the one with the higher payoff.

But again, if you really, really want to buy, then go ahead. Your trade-off is more than financial. It's also about settling down, decorating, doing maintenance, flexibility, etc. The thing about decisions is that the more equal the choices are, the more difficult the decision gets. Between the relative costs and your preferences, you appear to be in coin-flip territory.

Rebecca Stapler

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Re: Is this rent-vs-buy decision as complicated as we are making it?
« Reply #17 on: August 16, 2013, 01:50:15 PM »

1.  NEVER, ever buy a house with a partner to whom you are not married.  It's a recipe for disaster and has been discussed at length in several threads.

Finally, I just want to say I completely disagree with this.  Marriage schmarriage, half still end in divorce and that would just make it that much harder to deal with separating.  If you know ya'll are both in it to win it (and I firmly believe all couples truly know deep down if they're really going to be together for the long haul, through the good and through the ugly), then a piece of paper filed down at the courthouse makes no difference.

That piece of paper may not make a difference to the couple's relationship, but it makes a helluva difference when purchasing real estate. Divorce aside, if one person died, their family could move in or force a sale (or prevent a sale) of the home.

Sorry, but how they hold title to the property (and, if applicable, to whom the leave their divided interest in the property), is what matters for that, not whether they're married.

I don't know AK real property law, but in some states there is a title status only available to people who are married. To get around this barrier the OP can have an attorney draft a constellation of documents that will allow them the same benefits of joint ownership that married couples have.

A married couple may hold title as tenants in the entirety or by some other presumptive form that transfers to the survivor (e.g., joint tenants with right of survivorship, where it still exists), although even then I don't think every state presumes a married couple's "joint" title to take that form. Some states also permit JTWRS between married or unmarried persons, but I don't think Alaska does. Obviously, as with any couple they should take steps to see that their assets will be treated appropriately if one of them dies or becomes incapacitated, but your presumption is baseless, and referring to a "constellation of documents" doesn't really make it a major challenge. So as a reason not to buy property together, the legal status of married or unmarried isn't a significant factor (in any U.S. state, as far as I know, although there may be other places in the world where it is).

It's not baseless. Like I wrote, IDK what AK does, but in NY "tenancy by the entirety" is only available if you're married. But you have a good point -- in NY you can have JTWRS, which at least solves the death and beneficiary issue even if the dead owner doesn't have a will. http://www.nytimes.com/2000/08/13/realestate/your-home-unmarried-couples-and-property.html 

willn

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Re: Is this rent-vs-buy decision as complicated as we are making it?
« Reply #18 on: August 16, 2013, 02:35:38 PM »
Woah, woah, woah!  I did not expect to be made to feel such an extreme idiot for even asking this question.  I wouldn't be here, after months of browsing the MMM blog and forums, asking this question, if I didn't have very good reasons for proposing to buy!  I realize our financial situation is complicated and unusual, and our lifestyle is difficult to understand and plan for when framed in a format such as this.  Obviously I didn't explain myself clearly enough or give enough details.

But before I dive into the details, I want to express that I am actually offended by Another Reader's point-blank dismissal of my relationship with my fiance.  Thank you, brandino, for coming to the defense of committed couples-that-happen-to-not-be-married.  It bothers me that "it has Been Discussed At Length in these forums" apparently offers carte blanche for very rudely dismissing an alternative (though hardly a minority) lifestyle.

I didn't take that anyone thought you were an idiot, or made a judgement on your lifestyle. If you feel a bit defensive, I get it but I'd say consider the wisdom that might exist in the advice you were given--even if you don't like the tone.

There is significant risk in buying a house, married or not.  A big difference when you are married, is that if you do split, or die, or become disabled, or addicted, or any number of other risks, is that the law provides more orderly ways of disposing of your real property when necessary.  Still not easy or pretty but the solutions are 'prescriptive' generally.

Those of use who've watched friends and families and neighbors and others get into bad situations have a risk meter that goes up when we see someone buy real property and they aren't married. (And sometimes when they are.)   We've seen people assume a loan but leave the significant other on the title.  Or give title to the other, but not get off the loan.  We've seen family get crazy when there's a death, and the property has passed on to the kids but the significant other still lives there.

The list goes on but you get the idea.  It's solid general advice not to by real property with someone you aren't married to.  Period.  Yeah, you may be the exception.  Lots of people believe that.


Undecided

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Re: Is this rent-vs-buy decision as complicated as we are making it?
« Reply #19 on: August 16, 2013, 09:25:33 PM »
Woah, woah, woah!  I did not expect to be made to feel such an extreme idiot for even asking this question.  I wouldn't be here, after months of browsing the MMM blog and forums, asking this question, if I didn't have very good reasons for proposing to buy!  I realize our financial situation is complicated and unusual, and our lifestyle is difficult to understand and plan for when framed in a format such as this.  Obviously I didn't explain myself clearly enough or give enough details.

But before I dive into the details, I want to express that I am actually offended by Another Reader's point-blank dismissal of my relationship with my fiance.  Thank you, brandino, for coming to the defense of committed couples-that-happen-to-not-be-married.  It bothers me that "it has Been Discussed At Length in these forums" apparently offers carte blanche for very rudely dismissing an alternative (though hardly a minority) lifestyle.

I didn't take that anyone thought you were an idiot, or made a judgement on your lifestyle. If you feel a bit defensive, I get it but I'd say consider the wisdom that might exist in the advice you were given--even if you don't like the tone.

There is significant risk in buying a house, married or not.  A big difference when you are married, is that if you do split, or die, or become disabled, or addicted, or any number of other risks, is that the law provides more orderly ways of disposing of your real property when necessary.  Still not easy or pretty but the solutions are 'prescriptive' generally.

Those of use who've watched friends and families and neighbors and others get into bad situations have a risk meter that goes up when we see someone buy real property and they aren't married. (And sometimes when they are.)   We've seen people assume a loan but leave the significant other on the title.  Or give title to the other, but not get off the loan.  We've seen family get crazy when there's a death, and the property has passed on to the kids but the significant other still lives there.

The list goes on but you get the idea.  It's solid general advice not to by real property with someone you aren't married to.  Period.  Yeah, you may be the exception.  Lots of people believe that.

But everyplace that has joint tenancy or tenancy in common will also have a provision for judicial partition, which doesn't seem as a procedural matter to be categorically worse than divorce. And in a partition proceeding, I think the economics are more likely to be straightforwardly applied than in a divorce, where other equitable and societal concerns are likely to factor into a judicial decision. And nine of those other problems is solved by a marriage (and its dissolution).

The bottom line is that when two people own something together and don't want to do so on the same terms anymore, it's going to be messy, and the presumption that it is magically "better" if they were married and have to go through a divorce doesn't hold water (in the U.s., now).

Rebecca Stapler

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Re: Is this rent-vs-buy decision as complicated as we are making it?
« Reply #20 on: August 17, 2013, 07:29:31 AM »
Woah, woah, woah!  I did not expect to be made to feel such an extreme idiot for even asking this question.  I wouldn't be here, after months of browsing the MMM blog and forums, asking this question, if I didn't have very good reasons for proposing to buy!  I realize our financial situation is complicated and unusual, and our lifestyle is difficult to understand and plan for when framed in a format such as this.  Obviously I didn't explain myself clearly enough or give enough details.

But before I dive into the details, I want to express that I am actually offended by Another Reader's point-blank dismissal of my relationship with my fiance.  Thank you, brandino, for coming to the defense of committed couples-that-happen-to-not-be-married.  It bothers me that "it has Been Discussed At Length in these forums" apparently offers carte blanche for very rudely dismissing an alternative (though hardly a minority) lifestyle.

I didn't take that anyone thought you were an idiot, or made a judgement on your lifestyle. If you feel a bit defensive, I get it but I'd say consider the wisdom that might exist in the advice you were given--even if you don't like the tone.

There is significant risk in buying a house, married or not.  A big difference when you are married, is that if you do split, or die, or become disabled, or addicted, or any number of other risks, is that the law provides more orderly ways of disposing of your real property when necessary.  Still not easy or pretty but the solutions are 'prescriptive' generally.

Those of use who've watched friends and families and neighbors and others get into bad situations have a risk meter that goes up when we see someone buy real property and they aren't married. (And sometimes when they are.)   We've seen people assume a loan but leave the significant other on the title.  Or give title to the other, but not get off the loan.  We've seen family get crazy when there's a death, and the property has passed on to the kids but the significant other still lives there.

The list goes on but you get the idea.  It's solid general advice not to by real property with someone you aren't married to.  Period.  Yeah, you may be the exception.  Lots of people believe that.

But everyplace that has joint tenancy or tenancy in common will also have a provision for judicial partition, which doesn't seem as a procedural matter to be categorically worse than divorce. And in a partition proceeding, I think the economics are more likely to be straightforwardly applied than in a divorce, where other equitable and societal concerns are likely to factor into a judicial decision. And nine of those other problems is solved by a marriage (and its dissolution).

The bottom line is that when two people own something together and don't want to do so on the same terms anymore, it's going to be messy, and the presumption that it is magically "better" if they were married and have to go through a divorce doesn't hold water (in the U.s., now).

It all depends on the circumstances, and how you would prefer that things be divided. If you're contributing the down payment and the other party isn't, you should know how things will be divided in the event of a break-up or death. In some states, it would be different if you were married instead of joint tenants. If you don't contribute the down payment and don't make more than 50% of the mortgage payments, then not being married might work to your advantage more than it would if you were married. Like many legal matters, it all depends on your particular circumstances and state's law.

All that is to say: OP, if you choose to buy a home while not married, I recommend consulting with an attorney to find out how the property will be divided in the event of a break up, death, etc. No one wants to think about these things, but it does provide peace of mind.

ender

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Re: Is this rent-vs-buy decision as complicated as we are making it?
« Reply #21 on: August 17, 2013, 09:45:57 AM »
The thing these calculators don't take into account is the time it will take you to buy, sell, and maintain a home as well as the flexibility renting gives you. I've always found it incredibly liberating to know that I can pick up and move at almost any time as demands of lifestyle and geographical location change.

I'm in my mid-twenties and see this as one of the most extreme luxuries I can have. So many of those I graduated undergrad with are purchasing houses and I can't help but wonder if they realize they are committing to their current job, income level, geographic location, and company for many years - or taking on significant stress should they desire to move.

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Re: Is this rent-vs-buy decision as complicated as we are making it?
« Reply #22 on: August 17, 2013, 01:42:26 PM »
Thank you, everybody, so much for your candid advice.  I'm sorry that I originally got so defensive!  I guess I just expected a more gentle let-down.  But, in the end, I really appreciate so many votes against my plan A.  This whole thread has been great food for thought!

Your trade-off is more than financial. It's also about settling down, decorating, doing maintenance, flexibility, etc. The thing about decisions is that the more equal the choices are, the more difficult the decision gets. Between the relative costs and your preferences, you appear to be in coin-flip territory.

I think velocistar's comment really sums up where I am now on whether or not to buy a house.  If we do, we'll go into it with our eyes open, knowing it's a huge risk that might still be worth it.  We have a few months of free rent (crashing with friends) in Anchorage, and we'll see what comes up during that time that might shed some more light on the situation.

Thanks, everybody!

Sofa King

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Re: Is this rent-vs-buy decision as complicated as we are making it?
« Reply #23 on: August 18, 2013, 07:05:58 PM »
To me this seems like a pretty obvious "rent".

I concur.

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Re: Is this rent-vs-buy decision as complicated as we are making it?
« Reply #24 on: August 21, 2013, 03:39:27 PM »
Not sure how Alaska is for rentals as in you purchasing something to be a rental. If you like the idea of being more nomadic because of your jobs, what are the chances of finding a duplex or say a house with a MIL below deck that you can use as home base?

You do still have to qualify for financing and your varying income could be problematic, but maybe not so much if you get that windfall you see coming soonish.

I often think about a duplex in our favorite summer vacation spot (Utah - Midway area). I would hire a PM and keep one side for me and family. I envision it simply furnished ready to be home base for us, My company has an office near there as well so I could stay longer term and work as needed. It's a dream and not likely going to happen but it made me think of that idea for you perhaps. There's more than one way to skin the cat here:)

It would mean that when you do graduate, you can move on, have a PM run the rental until the time is best for you to sell it, or you can even hold it as income long term. I was thinking of this for you since you are not wanting to invest "all in" with the stock market or other lending venues.

Good luck on your hunt, I hope you keep posting so we know what happens in the end...

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Re: Is this rent-vs-buy decision as complicated as we are making it?
« Reply #25 on: April 06, 2014, 12:51:40 AM »
Hi advice-givers!

I just thought I'd update you all on fiance's and my eventual rent-v-buy decision.  Partly thanks to the sobering advice from this forum, we decided to rent and invest our extra $60-90k.  When it came down to it, all signs pointed to DON'T BUY!  I thoroughly appreciate you all pointing this out as bluntly as possible.

Cheers!

arebelspy

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Re: Is this rent-vs-buy decision as complicated as we are making it?
« Reply #26 on: April 06, 2014, 01:40:00 AM »
Hi advice-givers!

I just thought I'd update you all on fiance's and my eventual rent-v-buy decision.  Partly thanks to the sobering advice from this forum, we decided to rent and invest our extra $60-90k.  When it came down to it, all signs pointed to DON'T BUY!  I thoroughly appreciate you all pointing this out as bluntly as possible.

Cheers!

I missed this thread the first time around, but that seems like the best decision.

Thanks for the update!

There's never a rush to buy - invest all the money you can, and you'll have a chance to use it to buy soon enough.  ;)
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