Better to rent or buy a home?

Aggie03 · April 11th, 2006, 23:50

Quick summary:

My wife and I will be relocating to Dallas this summer where I will be picking up a few more ratings and then instructing to build some time. She has a pretty nice job lined up and we would both like to stay in the DFW area longterm if possible, but at the same time, I recognize that it may not be possible as I work my way up the aviation ladder. The real issue is if we should plan on renting until I have a potential longterm position or if it would be better to just buy the house (first time homeowner) and then try hard to find work in the area or somewhere that I could commute to. Is this a doomed plan? I would really like to buy a house, but at the same time I don't want to handicap my career because of it.

I don't know how much information I can expect on this topic, but surely some other people have faced a similar situation. Any thoughts? Tips? Thanks in advance.

Dugie8 · April 11th, 2006, 23:54

Here is how I look at things. One, no one else can tell you what is better for you, ie the money channel.

That being said. Owning a home, in theory, is like "making money". The problem is, to get that money you must be able to sell the home, quickly. If you are unsure of the stability of your financial future, find a way to live on just your wifes income, save as much of your money as you can. Get used to living like that. One income purely for savings and fun. Soon enough you will be able to buy a home outrite, and not have to worry about a mortgage.

Now if your financial future is fairly stable, as stable as it can be, then if you have the oppurtunity, owning a home as many advantages.

Short and simple, if you buy a house, can you afford the house (upkeep, taxes, utilities, etc plus house payment) on one income?

fender_jag · April 11th, 2006, 23:58

One of my best friends is a real estate agent/broker, and his rule of thumb is this: If you're in the area for less than two years, then rent. If you're planning on staying longer than that, then buy.

If you're uncertain, see if you like the area first, then consider buying.

Sprint100 · April 12th, 2006, 00:08

Quote:

Originally Posted by fender_jag

One of my best friends is a real estate agent/broker, and his rule of thumb is this: If you're in the area for less than two years, then rent. If you're planning on staying longer than that, then buy.

If you're uncertain, see if you like the area first, then consider buying.

In addition to that I would also say don't go into buying with the idea of making money. Look for a home not a get rich quick tool. Do a search though, we've talked about this many times to give you information to find your own answer and also consult with people like Mavmb and Nuanga.

Casper · April 12th, 2006, 00:40

smaller areas of the world...rent.

Larger and more profitable such as Dallas..buy if you can.

88MPH · April 12th, 2006, 01:21

Quote:

Originally Posted by fender_jag

If you're in the area for less than two years, then rent. If you're planning on staying longer than that, then buy.

I totally agree. Me & the wife just went through the same thing. We decided to buy. But we went through job stability, reliable income, how long we wanted to stay put, etc. Just be aware, the price tag on the home isn't the final price. Not including closing costs, realtor fees, interests, the home itself is going to tell you need to adjust to each other.

It'll sound like this: You're going to have to replace my AC, Garbage Disposal, Window seals, Toilet, and the leaky vent in the attic before we can like each other!!!"

Just be prepared, but in the end, if you're around for about 2-3 years, it'll pay off greatly!

Good Luck!

launchpad · April 12th, 2006, 01:48

I would say that you should buy (if you can) in a real estate market that lets you have a cheap house (like Houston...i'm not sure what dallas is like). Your payments will be around the same as if you rented, but you won't be pissing your money away to some landlord. The only downside is that you have to keep up with the up keep. The selling portion isn't a big deal because you can always rent wherever you go while your house is on the market, then buy a new place after the old one sells. At the very least you'll break even. I made a butt load of money on a house in FL that I only owned for 2 years......definitely better than paying 1100 a month in rent...money i'll never see again. If you have the means, buy a house...it'll pay off in the long run.

Casper · April 12th, 2006, 02:15

actually i disagree for the 2 year thing

really what you can do is after the two years, make a rental property and as such you can get alot of tax breaks by having retnal property.

88MPH · April 12th, 2006, 02:51

The main reason for the two years is that it gives enough time to pay off some of the loan, and build enough equity to actually make at least a small profit. Also AZ has a law that if you sell your house before living in it for two years, they consider it "investing" and make you claim it as income, and must pay taxes on it as such.

Yeah, you could buy rental, but that would be alot of liability if you had to move on short notice. I'm not knockin' the rental idea, under certain circumstances, it may be worth it though.

Mavmb · April 12th, 2006, 03:49

I am not sure what the Dallas market is like. In some hot markets, if houses are going up more than 10, 15% a year it is much better to own of course. Definitely, if you are going to be in the same place for two years or more it is much better to own. I am not a big fan of renting. Unless it is just for a couple months, renting tends to make someone else rich.

B767Driver · April 12th, 2006, 08:07

Quote:

Originally Posted by Aggie03

Quick summary:

My wife and I will be relocating to Dallas this summer where I will be picking up a few more ratings and then instructing to build some time. She has a pretty nice job lined up and we would both like to stay in the DFW area longterm if possible, but at the same time, I recognize that it may not be possible as I work my way up the aviation ladder. The real issue is if we should plan on renting until I have a potential longterm position or if it would be better to just buy the house (first time homeowner) and then try hard to find work in the area or somewhere that I could commute to. Is this a doomed plan? I would really like to buy a house, but at the same time I don't want to handicap my career because of it.

I don't know how much information I can expect on this topic, but surely some other people have faced a similar situation. Any thoughts? Tips? Thanks in advance.

I would be careful about buying a house before you are ready. My wife and I lived in apartments until we were 28. Of course I worked for 4 different aviation companies between the age of 21 and 28 which required alot of moving...each was necessary to fly in a bigger and more complex outfit. If you have to sell a house to accept a new move...it will really weigh you down.

Having said that...here's my formula. I think whenever you buy a house...you should have the financial ability to sell it tomorrow if circumstances dictate. A conventional mortgage amortized over 30 years with little or no money down...can financially kill you if you have to leave within 5 years or so.

Here's my advice to "young'uns" when they ask about buying a house. First make sure you have enough cash to make a 20% down payment. Secondly amortize the loan for no more than 15 years. Third, ensure that after the transaction that you still have enough of an emergency fund to last 3 to 6 months. (Being in aviation, as unstable as it is, I feel more comfortable with a larger emergency fund. I keep about 18 months worth of living expenses in mine.)

Until you can reach the above criteria...I would live as cheaply as you can...renting as cheaply as you can...eating alot of peanut butter and spaghetti...piling cash in your savings account to reach the above criteria. At one time, my wife and I lived in the upper level of a fourplex that cost $375 per month. But we were stashing away money at a great clip. It was definitely worth the temporary sacrifice. Do it while you're young...and like a popular radio financial commentator would say..."live like no one else so that later on you can live like no one else."

Don't get hoodwincked into buying a house with no money down and long amortized period...this is a recipe for disaster. Unfortunately alot of people are cooking that meal and I theorize down the road...these types of debt arrangements are going to seriously jeopardize the stability of our economy.

British Pilot · April 12th, 2006, 10:16

Let’s understand the first fundamental lesson of personal money management. Do not buy or invest in anything unless it makes financial sense for YOU, unfortunately everyone you meet likes to play financial advisor. Just because interest rates are at an all time low, or house prices are falling does not signify an opportunity for you if you are still living cheque to cheque or close to that. Equally beware those who bring you the clichés associated with house purchase vs. renting.

Contrary to popular belief, renting is not throwing money away, if it’s enabling you to save money or keep your head well above water, what are you throwing away? If renting vs. buying, affects your monthly housing payment drastically then you need to consider its merits, and building equity really shouldn’t be one….

I agree almost entirely with B767Driver, however the 20% down, 15 year term is somewhat tricky for most major metropolitan areas I should think. I live in Boston proper, where the average 1 bedroom sells for $300-$350k minimum. Not many young people have $60-70k down and can afford the $2,250 plus real estate taxes and condo fees.

The emergency fund B767 speaks of is key. 6 months of emergency fund is an absolute must. In my opinion, unless you have a 6 month emergency fund, less than a 20% balance to available credit ratio on your credit cards and zero student loan debt, you should not be out shopping to increase your monthly housing commitment beyond what is necessary at this point….especially in this industry.

“Building equity” is a great concept, but never grows at the rate you expect, and like money on the stock exchange is an uncertainty. Equity built in 2006 can disappear in 2007, and equity means less than nothing until you come to sell or refinance since today's market conditions suggest what your house is worth,not what it used to be worth.
Conversely, the savings you had stuffed in your mattress or earning less than 1% in your instant access savings account with Bank of America, will still be there in their entirety.

B767Driver · April 12th, 2006, 10:43

[quote=British Pilot] .

Contrary to popular belief, renting is not throwing money away, if it’s enabling you to save money or keep your head well above water, what are you throwing away? If renting vs. buying, affects your monthly housing payment drastically then you need to consider its merits, and building equity really shouldn’t be one….

Very good point.

I agree almost entirely with B767Driver, however the 20% down, 15 year term is somewhat tricky for most major metropolitan areas I should think. I live in Boston proper, where the average 1 bedroom sells for $300-$350k minimum. Not many young people have $60-70k down and can afford the $2,250 plus real estate taxes and condo fees.

I think I would find a career in a more affordable section of the world.

SteveC · April 12th, 2006, 11:31

767 and BP are right on.

Bog · April 13th, 2006, 13:03

Three letters for ya: H U D.

I have no plans on staying in TN for more than another 2 years, and I don't even want to stay that long. The idea of throwing away more rent money didn't look good either. I'm buying a HUD home, and will have $15k+ in equity in the house the day I sign the papers.

Goto www.bidselect.com and check it out. Some HUD homes are rat traps, but many are in great shape. Don't pay retail!

Aggie03 · April 14th, 2006, 14:20

Thanks for all the help everyone! I definitely have some thinking to do, there is a lot of good advice in this thread.

Flyingbug · April 16th, 2006, 15:38

I checked some house prices in FL ( mainly vero beach area...as i plan on instructing at FSA until something bigger/better comes along)..A half decent house(nothing fancy) ranges somewhere around $250-$300k or so....I have two properties here in canada....One being my residence will be sold before i move to FL, i am 28.

I agree with B767 and others about the 20% down strongly..I will have some money for the downpayment of the house from my sale as i have owned it since i was 24...my wife however is not sure about the idea of buying a house when we move there...mainly because vero beach being a small town ...unsure of how long we are going to live there...and so forth.
But,me on the other hand ...i have past the idea of renting...and don't feel it is a good idea to rent at all...maybe in the beginning for a month or two...but I am trying to convince my wife into buying something.....at least in the bigger cities around vero like melbourne/west palm beach...so on. I have to factor in the travel time to work then as well.

any thoughts would help.....from guys that hve been .....in a similar type situation,how did they cope with this?

How is vero beach/melbourne area to live...I am trying to get some first hand suggestions rather than what they have on city-data sites.

fender_jag · April 17th, 2006, 11:37

Quote:

Originally Posted by B767Driver

Here's my advice to "young'uns" when they ask about buying a house. First make sure you have enough cash to make a 20% down payment. Secondly amortize the loan for no more than 15 years. Third, ensure that after the transaction that you still have enough of an emergency fund to last 3 to 6 months. (Being in aviation, as unstable as it is, I feel more comfortable with a larger emergency fund. I keep about 18 months worth of living expenses in mine.)

A 20% down payment on a home in most parts of California is nearly an entire mortgage in other parts of the country.