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So...do folks here feel that renting for two to even three years is still a wash (or possibly a better return) vs buying? Let me give some background to my situation and prices, etc.
I'm 58, two college age 'kids'.
I'm not enamored with my job nor my location and would love to move out of state. Soon-ish.
2 Bedroom Houses/Townhouses here are ~$390K (plus needed improvements) while rents for similar spaces are ~$2k per month (very nice apartments, pet friendly too!).
I do not own any other real estate.
My heart says take a break from renovating, shoveling, mowing and rent the nice place for $2k for maybe two years and see what happens. My financial side says Never Rent, and I can't be out of the real estate market this long, and prices will not come down.
Most math says the breakeven point is about 3 years.
So...do folks here feel that renting for two to even three years is still a wash (or possibly a better return) vs buying? Let me give some background to my situation and prices, etc.
I'm 58, two college age 'kids'.
I'm not enamored with my job nor my location and would love to move out of state. Soon-ish.
2 Bedroom Houses/Townhouses here are ~$390K (plus needed improvements) while rents for similar spaces are ~$2k per month (very nice apartments, pet friendly too!).
I do not own any other real estate.
My heart says take a break from renovating, shoveling, mowing and rent the nice place for $2k for maybe two years and see what happens. My financial side says Never Rent, and I can't be out of the real estate market this long, and prices will not come down.
Most math says the breakeven point is about 3 years.
What's your advice please?
Thanks!!!
If you have insomnia and want something to put you to sleep, you can read the long version of renting vs. buying.
Renting can be a better deal if you live in a cheaper apartment and then save the difference. If you think you want to move soon-ish, then renting probably makes more sense. Remember you will pay a ton of interest in those first 2-3 years so it isn't much different than renting from that perspective as you aren't making significant inroads into equity.
In the OP's case, it may make more sense to rent than to buy, but given how high rents are, it's unlikely most people could rent something cheaper than they'd buy, unless they're renting a 1BR or something.
2 Bedroom Houses/Townhouses here are ~$390K (plus needed improvements) while rents for similar spaces are ~$2k per month (very nice apartments, pet friendly too!).
Typically on this Forum I'm one of the more vehement cheerleaders for renting. But given the above numbers, the nod goes to buying. Why? Rent to value ratio. If you can buy a house for $390K, that rents for $2000/month, then the PITI as an owner might be comparable to the rent... or possibly even less, depending on your down payment and local property taxes.
The reason to rent, is if rental costs are very substantially lower than ownership costs. That is the reality in my current market. But if your numbers are at all accurate, consider buying. If you need to relocate later, get a tenant.
I was just having this discussion with my husband in regards to our daughter. I went and found a mortgage calculator and on a 190,000 with current interest rate of 4 something % and as little as 5,000 down, the monthly payment would be around 700 a month. Rents for a house are running over 1500 a month. In her situation it is better for her to buy a home then rent.
Typically on this Forum I'm one of the more vehement cheerleaders for renting. But given the above numbers, the nod goes to buying. Why? Rent to value ratio. If you can buy a house for $390K, that rents for $2000/month, then the PITI as an owner might be comparable to the rent... or possibly even less, depending on your down payment and local property taxes.
The reason to rent, is if rental costs are very substantially lower than ownership costs. That is the reality in my current market. But if your numbers are at all accurate, consider buying. If you need to relocate later, get a tenant.
There is a lot more factors to consider when it comes to rent vs. buy other than financial consideration:
1) How long do you expect to be at the new place? If it's less than 7 years, then consider renting.
2) Do you know the new area well enough to commit to buy a place for a minimum of 7 years? If not, then consider renting.
3) Do you want to commit to maintenance & repair of the house/ yard? If not, then consider renting.
4) Do you enjoy gardening/ yard work? If not, then consider renting.
Financially, for a $390K house with 20% down at a 30 yr fixed mortgage at 5.5%, you're looking at a monthly P&I of $1,771, but if include taxes & insurance, your monthly PITI will be $2,300.
Simple math would dictate that it would take 16 yrs of renting to amount to $390K purchase..........
The big difference is that after 16 years of renting, you have nothing but old receipts and after buying, 16 years later, you can sell the house and get your $390K back (and probably a lot more).
But it does not make any sense to buy if you know you are not staying more than a couple of years and when you move to a brand new location, it makes a lot of sense to rent for a year or two and look around and make sure you want to live there and learn which neighborhood you want to live in.
There is a lot more factors to consider when it comes to rent vs. buy other than financial consideration: ...
I don't dispute anything on your list; indeed, these are valuable points. Rather, my aim was to take advantage of this thread, with the specific dollar-figures presented in this thread, to note that our perennial buy-vs-rent debate rarely has hard numbers. This time, it does. And those numbers, given some resolution of the conditions that you stipulate in your list, make buying at least plausible, if not outright appealing.
This is to say, that an embrace of renting, is not a religion or a dogma. It is contingent on market conditions. These conditions can vary and change substantially. It is also possible to make a grievous personal blunder, despite good overall conditions. Protecting oneself from such blunder, may mean a suboptimal financial decision, paying as it were a "tax" for the peace of mind. Nevertheless, if it so happens that the numbers overwhelmingly favor buying, then the various barriers and inhibitions fall.
I wouldn't be a buyer now, all signs are pointing to a housing correcting going into 2023. In "normal" times. Rule of thumb is "buy for 5". You'll want to stay there 5 years, this will allow the home to appreciate enough to offset the cost of selling. Otherwise, rent.
Great input. Thank you.
The estimates I provided for purchasing require $90k down for a house requiring work but with a comparable piti vs renting a nice 2 bedroom. So...granted, the buy side requires more time and money.
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